YOU WIN $500,000 do you want to be paid out all at once or do you want to receive annual end of year payments of $33,000 for 20 years. you can earn 3% per year, what is the persent value of the annuity stream.

YOU WIN $500,000 do you want to be paid out all at once or do you want to receive annual end of year payments of $33,000 for 20 years. you can earn 3% per year, what is the persent value of the annuity stream.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 1QTD

See similar textbooks

Related questions

Q: You are scheduled to receive $44,000 in two years. When you receive it, you will invest it for 7…

A: Computation:

Q: Assume you are planning to invest $200 each year for four years and will earn 8 percent per year.…

A: Excel Spreadsheet:

Q: What would you pay for an annuity of $2,000 paid every six months for 12 years if you could invest…

A: Details given in the question are : Annuity payment every six months (PMT) = $2000 Time period (n) =…

Q: you wish to save $30,000 as a down payment for a house in 7 years. How much must you save every year…

A: Given: FV =$30000NPER =7 YearsRate of Interest =4%

Q: If you put 45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash…

A: Present Value = 45,000 Rate = 6.4% Time period = 15 ye

Q: To save for a down payment on a home, you invest in an annuity that pays 7.0% annual interest,…

A: The interest earned on the annuity can be calculated with the help of future value of annuity…

Q: An insurance annuity offers to pay you $1,000 per quarter for 20 years starting immediately. If you…

A: Excel Spreadsheet:

Q: You have the opportunity to buy a perpetuity that pays $1,000 annually. Your required rate of return…

A: Payments each year = Cash flow = C = $1000 Rate of Interest = r = 13.2% = 0.132

Q: The Solvent Insurance Co. will pay you $4,750 a year for 15 years in exchange for $45,000 today.…

A: in this you have to find out present value FACTOR and from that you can get interest rate.

Q: compounded

A: Formula to calculate the present value or amount to be deposited today is: PV = FV/(1+r)^n Where PV…

Q: A new engineer wants to save up P1,000,000. He will contribute P5,000 annually to an investment…

A: Introduction:- The devotion of an asset to achieve a gain in value through time is referred to as an…

Q: A balloon payment of $21,000 on your house is due in 10 years. Ifyou can earn an average of 5…

A: INTEREST RATE 5% YEARS 10 PMT 0 FUTURE VALUE 21000

Q: If you want to be paid from a 14 year ordinary annuity with a guaranteed rate of 2.208% compounded…

A: In finance, the term annuity represents a sequence of cash flows that contain a fixed payment at…

Q: If you put up $30,000 today in exchange for a 6.50 percent, 15-year annuity, what will the annual…

A: A series of fixed payments that are paid or received at an equal time interval is term as the…

Q: An annuity offers $1,000 for 10 years. If you can earn 12 percent annually on your funds, what is…

A: Annuity Amount = $1,000 Years(n) = 10 Interest Rate(r) = 12% Present Value of Annuity =…

Q: Suppose an annuity will pay $14,000 at the beginning of each year for the next 5 years. How much…

A: Annual payment (P) = $14,000 Interest rate (r) = 6.5% Period (n) = 5 Years

Q: If you want to be paid from a 15 year ordinary annuity with a guaranteed rate of 4.277% compounded…

A: Annual payment (C) = $10,000 Period (n) = 15 Years rate (r) = 0.04277 (i.e. 4.277%) Present value or…

Q: You begin saving for your retirement by investing $640 per month in an annuity with a guaranteed…

A: The question is based on the concept of future value of growing annuity with annual growth rate, the…

Q: If you need P350,000 for a down payment on a house in 3 years, how much money must you invest today…

A: Present value: It can be defined as today’s worth of an investment that will be received in the…

Q: you have a chance to buy an annuity that pays $1,000 at the end of each year for 5 years. You could…

A: The most we should pay for the annuity is nothing but the present value of annuity. Therefore, In…

Q: A company wants to have $50,000 at the beginning of each 6-month period for the next 4 1/2 years. If…

A: Annuity is the regular payment to be made for specific number of years. There are two types of…

Q: Suppose you save $4,000 per year at the end of each year for 3 years and earn 5% interest per year.…

A: Annuity is no. of payments which is equal in size and made at equal interval of time. Person get…

Q: You are considering an annuity which costs $120,000 today. The annuity pays $13,255 a year at an…

A: Given: Present value of Annuity=$120000Annuity =$13255Interest rate (r)=9.75%

Q: A $500,000 whole life policy is available for $5150 per year, payable at the beginning of the year.…

A: Life policy per year $ 5,150 Insurance amount ($5,150 x 10%) $ 515 Savings plan ($5,150 x 90%) $…

Q: If you put up $37,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual…

A: Time value of money states that the worth of money in present is always more than that of future…

Q: How much will you have in accumulated savings 20 years from now if you deposit $2,000 at the end of…

A: Period = 20 Years Year end deposit = $ 2000 Growth rate = 2% Interest rate = 5%

Q: You expect to receive $150,000 per year on a contract that will last 5 years. You are trying to…

A: Present value of future cash inflows will be equal to the worth of contract today. Worth of…

Q: You deposit $3000 each year into an account earning 5% interest compounded annually. How much will…

A: Annuity payments: It refers to the fixed payment made in series or equal time intervals. Example:…

Q: If you put up $73,000 today in exchange for an annual 6.75 percent, 18-year annuity, what will the…

A: The annual cash flow can be computed with the help of present value of annuity.

Q: A retirement account has $260,000.00 that will be used to start an annuity that earns 4.1%,…

A: Please see the next step for the solution

Q: Donald Johnson has just given an insurance company $20,000. In return, he will receive an annuity of…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: Suppose you invest in an annuity that pays 5% interest, compounded semiannually. How much will you…

A: Formula used as follows: S=R1+in-1iS=Future valuei=Interest rate per periodn=Number of…

Q: You deposit $3000 each year into an account earning 8% interest compounded annually. How much will…

A: Future value of annuity is used to calculate the value of streams of cash flows in future at a given…

Q: It is estimated that you will pay about $80,000 into the Social Security system (FICA) over your…

A: The future value is the value of the equal deposits at the end of the deposit period. The…

Q: You just won the lottery, which promises you $440,000 per year for the next 20 years. You receive…

A: Given data; Payment amount = $440,000 number of payments = 20 discount rate = 9% annuity due

Q: you put up $45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash…

A: Given information: According to the question, the present value is $45,000 Rate of interest : 6.4%…

Q: A 10%, 4-year annuity pays $500.00 each year. What is the future value of the annuity?

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: You buy a car for $34,000. You pay $10,000 down and finance the rest at 3% monthly over five years.…

A: Value of Car is $34,000 Down Payment is $10,000 Loan Amount (PV) is: Interest Rate (Rate) is 3%…

Q: Suppose you put $ 600 a month for retirement into an annuity earning 7.5% compounded monthly. If you…

A: To calculate the number of years, excel NPER function is used.

Q: If you put up $41,000 today in exchange for a 5.1 percent, 15-year annuity, what will the annual…

A: Given,Exchange rate (rate) = 5.1%Time Period (nper) = 15 Years (Annuity)Initial Outflow (pv) =…

Q: You

A: An annuity refers to a series of payments made at regular interval of time.

Q: Wildhorse Co. is considering investing in an annuity contract that will return $28,140 annually at…

A: Present value: This is the amount of future value reduced or discounted at a rate of interest till…

Question

Video Video

Expert Solution

Step 1

Calculation of Present Value of Annuity Stream:

The present value of annuity stream is $490,956.67.

Excel Spreadsheet:

А
В
1 Annual Payments
2 Interest Rate
$33,000
3%
3 Number of Years
20
4 PV of Annuity Stream $490,956.67

Step 2

Excel Workings:

А
В
1 Annual Payments
33000
0.03
20
2 Interest Rate
3 Number of Years
4 PV of Annuity Stream PV(B2,B3,-B1,0)

Step by step

Solved in 3 steps with 2 images

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?
How much must be invested now to receive $50,000 for 8 years if the first $50,000 is received in one year and the rate is 10%?
How much would you invest today in order to receive $30,000 in each of the following (for further Instructions on present value In Excel, see Appendix C): A. 10 years at 9% B. 8 years at 12% C. 14 years at 15% D. 19 years at 18%
You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.