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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.
check_circleAnswer
Step 1

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

MS-Excel --> Formulas --> Financials --> PMT

=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
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=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

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Step 2

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

...

=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
help_outline

Image 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

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