If $80,000 is invested in an annuity that earns 5.3%, compounded quarterly, what payments will it provide at the end of each quarter for the next 8.5 years?
If $80,000 is invested in an annuity that earns 5.3%, compounded quarterly, what payments will it provide at the end of each quarter for the next 8.5 years?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 1P
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Question
If $80,000 is invested in an
Expert Solution
Step 1
The total number of years is 8.5.
The total number of quarters will be (8.5 × 4) = 34.
Interest rate is 5.3%, compounded quarterly.
Interest rate per quarter is (5.3% ÷ 4) = 1.325%.
The below expression can be used to calculate quarterly payments:
Here,
i is interest rate.
n is the number of payments.
Step 2
The amount of quarterly payment is:
Step by step
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