Question

1. What is the future value of an 8 year ordinary annuity with an annual payment of $600 if the interest rate is 13.5%?

2.          What is the present value of a 17 year ordinary annuity with an annual payment of $216,000 if the opportunity cost rate is 15.2%?

3.          An ordinary annuity pays $16,375 per year for 9 years. If you pay $100,000 for this annuity now, what rate of return (interest rate) will you earn?

4.          A 22 year ordinary annuity has a present value of $28,520. If the interest rate on this annuity is 12%, what is the amount of each payment?

5.          Your friend has just turned 22 years old and wants to be able to retire at age 50 with $1,000,000. If your friend can earn an after tax rate of return on investment of 8.64%, how much must she save annually beginning one year from now (for 28 years) in order to achieve this goal?

Please show work, Thank you

Answer 1

value pmt x ((1+r)^n-1))/r $7,795.64 Future 600* (((1.135^8)-1)/0.135)