Your friend offers to pay you an annuity of $2,500 at the end of each year for 10 years in return for cash today. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

Q: If you deposit 500 pesos at the end of each year for 3 years into an annuity that pays 5% annual…

A: An annuity is a contract between you and an insurance company in which you pay a lump-sum payment or…

Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $75,000 of…

A: The cost to buy an annuity today is calculated by discounting the annuity values with the present…

Q: A rich aunt has promised you 6000 one year from today. In​ addition, each year after​ that, she has…

A: This question can solved on the basis on Net Present Value Method (NPV)

Q: Arona would like to receive $15,820 each year for the next 5 years, starting today.  Then she hopes…

A: Since payment is due today or at the beginning of the year, this is annuity due problem.  For…

Q: You are offered the opportunity to put some money away for retirement. You will receive 6 annual…

A: Computation:

Q: You have just won the lottery and took a lump sum payout. After talking with a financial adviser you…

A: Present value of $16,000: Present value: $376,205.407024

Q: You have a chance to buy an annuity that pays $12,800 at the end of each year for 3 years. You could…

A: Annuity refers to the fixed periodic payments which can be paid weekly, monthly, quarterly,…

Q: Your investment advisor says you can buy an annuity now that will pay you $25,000 per year for the…

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: Your father is about to retire, and he wants to buy an annuity that will provide him with $85,000 of…

A: Present Value:  The present value is the value of cash flow stream or the fixed lump sum amount at…

Q: A new investment opportunity for you is an annuity that pays $800 at the beginning of each year for…

A: Beginning of period Annuity Annuity Amount = 800 Time Period (N) = 3 years Rate = 5.5%

Q: An aunt gifts you with $12,000, but only after you invest it for one year. She gives you two…

A: INTEREST RATE  4.2% 7.1% PERIOD   12 12 PMT  0 1000 PRESENT VALUE $12,000 0

Q: Roger Baker has accumulated $775,000 in his RRSP and is going to purchase a 20-year annuity from…

A: An Annuity is simply a fixed amount which will be received by Roger Baker at every month-end Present…

Q: Art wants to know how much he'll have to invest today to receive an annuity of $8,000 for three…

A: The computation of amount of investment is as follows:The investment needed today is the present…

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: Your friend offers to pay you an annuity of $6,800 at the end of each year for 3 years in return for…

A: Present value of Annuity = Annuity ×1-(1+r)-nrwhere,r=interest raten=number of periods

Q: An investment will provide you with $100 at the end of each year for the next 10 years. What is the…

A: Time period is 10years Discount rate is 8% Annuity amount per year is $100 To Find: Present Value…

Q: You have a chance to buy an annuity that pays $2,500 at the end of each year for 3 years. You could…

A: Given,  The amount of annuity payment is 2,500 Number of years 3 Rate of interest is 5.5%

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: Your friend Anne is planning to invest $500 each year for five years and will earn a rate of 5.5…

A: According to the time value of money, the money available in the present is worth more than the same…

Q: Your insurance company offered you an annuity that pays you $100 at the end of each year. The life…

A: PV computes the existing value of future benefits by discounting future cash flows with a given…

Q: You are offered an annuity that will pay $11,000 per year for 24 years (the first payment will occur…

A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…

Q: Dean Gooch is planning for his retirement, so he is setting up a payout annuity with his bank. He…

A: The annuity is a series of cash flow wherein an equal amount is paid every period.

Q: You plan to place $1,200 per year into a Roth IRA. You expect to earn 6% APR and you will place this…

A: Given, The yearly deposit is $1,200 Rate is 6% Term of investment is 35

Q: You have a chance to buy an annuity that pays $2,500 at the end of each year for 3 years. You could…

A: Here, Annual Payment is $2,500 Interest Rate is 5.5% Time Period is 3 Years

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: Your friend offers to pay you an annuity of $2,800 at the end of each year for 3 years in return for…

A: The amount to be paid today can be calculated using discounting the future cash flows at the rate of…

Q: A man can sell his business for $800,000 cash or for $125,000 plus $12'I a. Find the present value…

A: A study that proves that the future worth of the money is lower than its current value due to…

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: You are working for a finance firm and a client comes to you and wants to know how much money they…

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: Brianca plans to save $5,000, $1,000, and $42,000 a year over the next three years, respectively.…

A: Time value It tells that value received today has more value than that of receiving the same amount…

Q: Assume that you just inherited an annuity that Will pay you 10,000 per year, with the first payment…

A: Present value of perpetuity = Annuity amount /rate of return  60,000 = 10,000 / rate of return  Rate…

Q: An investor deposits $100 into his credit union account that pays interest at the rate of 3.25% per…

A: Future Value = Present Value * (1+interest %)^N Future Value = 100*(1.0325)^7 Future Value =…

Q: Your insurance company offered you an annuity that pays you $100 at the end of each year. The life…

A: An annuity is an agreement between an individual and an insurance company in which the individual…

Q: an annuity that pays $1,000 at the end of each year for 5 years. You could earn 6% on your money in…

A: The given problem can be solved using PV function in excel. PV function computes present worth for…

Q: You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the…

A: Annuity means the person will invest some amount today and the person will receive certain fund…

Q: An annuity saleman showed up at your door and gave you the following offer: His company is willing…

A: using excel Rate function

Q: If you desire to have $10,000 for a down payment for a house in five years, what amount would you…

A: Calculation of Amount to Deposit Today:The amount to deposit today is $7,835.26.Excel Spreadsheet:

Q: You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the…

A: Annuity means where regular payment is made at the end of regular period and full amount with…

Q: Your friend offers to pay you an annuity of $9,300 at the end of each year for 3 years in return for…

A: Solution:- When an equal amount is paid each period at end of period, it is called ordinary annuity.…

Q: You will deposit $5000 into a retirement account that earns 3% interest compounded annually. You…

A: Future value of the deposit = Future value of the single deposit i.e. $5000 + future value of the…

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.