save for his retirement. He arranged to have $130 taken out of each of his Diweekly checks; it will earn 9 7/8% Interest. He just had his twenty-nint birthday, and his ordinary annuity comes to term when he is 65. ( Round your answers to the nearest

save for his retirement. He arranged to have $130 taken out of each of his Diweekly checks; it will earn 9 7/8% Interest. He just had his twenty-nint birthday, and his ordinary annuity comes to term when he is 65. ( Round your answers to the nearest

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

Dick Eckel recently set up a TDA to
save for his retirement. He arranged
to have $130 taken out of each of his
biweekly checks; it will earn 9 7/8%
interest. He just had his twenty - ninth
birthday, and his ordinary annuity
comes to term when he is 65. (
Round your answers to the nearest
cent.) (a) Find the present value of
the given annuity. $ (b) Interpret the
present value of the given annuity.
You would have to invest a lump sum
of $ now instead of $130 biweekly.

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