An annuity with a cash value of $12,000 pays $880 at the beginning of every three months. The investment earns 5% compounded quarterly. (a) How many payments will be paid? (b) What is the size of the final annuity payment?

An annuity with a cash value of $12,000 pays $880 at the beginning of every three months. The investment earns 5% compounded quarterly. (a) How many payments will be paid? (b) What is the size of the final annuity payment?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Question

An annuity with a cash value of $12,000 pays $880 at the beginning of every three months. The investment earns 5% compounded quarterly.

(a) How many payments will be paid?

(b) What is the size of the final annuity payment?

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