  How much annual income would need to be generated over a 5 year period, to be equivalent to\$4,000 over an 8 year period? Consider 6% nominal interest (compounded annually) for both cases.

Question
How much annual income would need to be generated over a 5 year period, to be equivalent to
\$4,000 over an 8 year period? Consider 6% nominal interest (compounded annually) for both cases.
Step 1

Calculate the annual income over a period of 5 years as follows:

MS-Excel --> Formulas --> Financials --> PMT help_outlineImage Transcriptionclose=PMT(6%,5,,-4000) Function Arguments ? X PMT =0.06 Rate 6% = 5 Nper 5 Pv =number Fv =4000 4000 Турe | = number = 709.5856017 Calculates the payment for a loan based on constant payments and a constant interest rate. Type is a logical value: payment at the beginning of the period 1; payment = at the end of the period 0 or omitted. Formula result 709.5856017 Help on this function ок Cancel fullscreen
Step 2

Calculate the annual income over a period of 8 years as follows:

... help_outlineImage Transcriptionclose=PMT(6%,8,-4000) Function Arguments X РMT Rate 6% =0.06 = 8 Nper 8 Pv =number Fv 4000 = 4000 Турe | number = 404.1437706 Calculates the payment for a loan based on constant payments and a constant interest rate. Type is a logical value: payment at the beginning of the period at the end of the period 0 or omitted. 1; payment = 404.1437706 Formula result Cancel OK Help on this function fullscreen

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