(Related to Checkpoint 6.2) (Present value of an ordinary annuity) Nicki Johnson, a sophomore mechanical engineering student, receives a call from an surance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she acould buy that wouldh guarantee her a foxed annual income. The annuities are as follows: Purchase Price of the Annuity (At t 0) $40,000 $40,000 Amount of Money Received Per Year Duration of the Annuity (Years) Annuity A $6,500 18 22 B CU IN $6,000 $7,500 C $50,000 16 (Click on the icon o in order to copy its contents into a spreadsheet.) Nicki could earn 12 percent on her money by placing it in a savings account Alternatively, she could place it in any of the above annuities Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 12 percent? STKY Gen a. If Nicki could earn 12 percent on her money, what is the present value of annuity A with $6,500 payments per year and 18 years duration? (Round to the nearest cent ) Madison- If Nicki could ean 12 percent on her money by placing it in a savings account, should she place it instead in annuity A? (Select the best choice below) O A. Yes Nicki should place her money in annuity A because the present value of the annuity is greater than the initial payment OB. No Nicki should not place her money in annuity A because the present value of the annuity is smaller than the initial payment cel mework Madison b. If Nicki could earn 12 percent on her money, what is the present value of annuity B with $6,000 payments per year and 22 years duration? (Round to the nearest cent) It Nicki could ean 12 percent on her monev bv olacina it in a savinas account. should she olace it instead in annuitv B? (Select the best choice below) Simulation Final Report Health Insuran Next
(Related to Checkpoint 6.2) (Present value of an ordinary annuity) Nicki Johnson, a sophomore mechanical engineering student, receives a call from an surance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she acould buy that wouldh guarantee her a foxed annual income. The annuities are as follows: Purchase Price of the Annuity (At t 0) $40,000 $40,000 Amount of Money Received Per Year Duration of the Annuity (Years) Annuity A $6,500 18 22 B CU IN $6,000 $7,500 C $50,000 16 (Click on the icon o in order to copy its contents into a spreadsheet.) Nicki could earn 12 percent on her money by placing it in a savings account Alternatively, she could place it in any of the above annuities Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 12 percent? STKY Gen a. If Nicki could earn 12 percent on her money, what is the present value of annuity A with $6,500 payments per year and 18 years duration? (Round to the nearest cent ) Madison- If Nicki could ean 12 percent on her money by placing it in a savings account, should she place it instead in annuity A? (Select the best choice below) O A. Yes Nicki should place her money in annuity A because the present value of the annuity is greater than the initial payment OB. No Nicki should not place her money in annuity A because the present value of the annuity is smaller than the initial payment cel mework Madison b. If Nicki could earn 12 percent on her money, what is the present value of annuity B with $6,000 payments per year and 22 years duration? (Round to the nearest cent) It Nicki could ean 12 percent on her monev bv olacina it in a savinas account. should she olace it instead in annuitv B? (Select the best choice below) Simulation Final Report Health Insuran Next
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications
Section: Chapter Questions
Problem 15E
Related questions
Question
Transcribed Image Text:(Related to Checkpoint 6.2) (Present value of an ordinary annuity) Nicki Johnson, a sophomore mechanical engineering student, receives a call from an
nsurance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she could buy that would
quarantee her a fixed annual income. The annuities are as follows:
Purchase Price of the
Amount of Money
Duration of the
Annuity (Years)
18
Annuity
Annuity (At t = 0)
Received Per Year
$6,500
$6,000
A.
$40,000
B
$40.000
22
BCU IN
$50,000
$7.500
16
(Click on the icon D in order to copy its contents into a spreadsheet.)
Nicki could earn 12 percent on her money by placing it in a savings account Alternatively, she could place it in any of the above annuities. Which annuities in the
table above, if any, will earn Nicki a higher return than investing in the savings account earning 12 percent?
GTKY Gen
a. If Nicki could earn 12 percent on her money, what is the present value of annuity A with $6,500 payments per year and 18 years duration?
S (Round to the nearest cent.)
Madison-
If Nicki could earn 12 percent on her money by placing it in a savings account, should she place it instead in annuity A? (Select the best choice below)
O A. Yes Nicki should place her money in annuity A because the present value of the annuity is greater than the initial payment.
O B. No Nicki should not place her money in annuity A because the present value of the annuity is smaller than the initial payment.
Excel
Madison
omework
b. II Nicki could earn 12 percent on her money, what is the present value of annuity B with $6,000 payments per year and 22 years duration?
S (Round to the nearest cent)
If Nicki could eam 12 percent on her monev bv olacina it in a savinas account, should she place it instead in annuitv B? (Select the best choice below)
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Transcribed Image Text:INICI COUIO earn 12 percent on ner money by piacing it in a savings account, snouia sne piace it instead in annuity b? (Seiect tne pest cDoIce peiow
O A. Yes. Nicki should place her money in annuity B because the present value of the annuity is greater than the initial payment
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O B. No. Nicki should not place her money in annuity B because the present value of the annuity is smaller than the initial payment
c. If Nicki could earn 12 percent on her money, what is the present value
annuity C with $7,500 payments per year and 16 years duration?
s (Round to the nearest cent.)
Madison
If Nicki could eam 12 percent on-her money by placing it in a savings account, should she place it instead in annuity C? (Select the best choice below.)
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O A. Yes Nicki should place her money in annuity C because the present value of the annuity is greater than the initial payment
O B. No Nicki should not place her money in annuity C because the present value of the annuity is smaller than the initial payment
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Expert Solution
Step 1
Annuity refers to a series of payments with a fixed number of instalments of the same value and made at regular intervals. This concept is utilized to determine a consistent income.
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