Concept explainers
In Exercises 13-16, use the Annual Payout Annuity with COLA Formula to find the deposit necessary to receive monthly payouts with an annual cost-of-living adjustment. To use the formula, all figures must be annual figures including the payout and the annual rate. You can adapt the formula for monthly payouts by using
• The future value of a one-year ordinary annuity in place of the annual payout, where pymt is the monthly payout, and
• The annual yield of the given compound interest rate in place of the annual rate
Fabiola Macias is about to retire, so she is setting up a payout annuity with her bank. She wishes to receive a monthly payout for the next twenty-five years, where the payout starts at
a. The annual payout is the future value of a one-year ordinary annuity. Find this future value.
b. The annual rater is the annual yield of
c. Use the Annual Payout Annuity with COLA Formula to find how much money she must deposit.
d. Fabiola could have saved for her payout annuity with an ordinary annuity. If she had started doing so thirty years ago, what would the required monthly payments have been? (The two annuities pay the same interest rate.)
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
EBK MATHEMATICS: A PRACTICAL ODYSSEY
- An annuity is a sum of money that is paid in regular equal payments. The __________ of an annuity is the sum of all the individual payments together with all the interest.arrow_forwardA retirement account is opened with an initialdeposit of 8,500 and earns 8.12 interest compounded monthly. What will the account beworth in 20 years?arrow_forwardWhat is your monthly payment if you borrow 5000 at a monthly rate of 0.61 and pay it off in 5 years?arrow_forward
- College AlgebraAlgebraISBN:9781305115545Author:James Stewart, Lothar Redlin, Saleem WatsonPublisher:Cengage Learning
- Algebra & Trigonometry with Analytic GeometryAlgebraISBN:9781133382119Author:SwokowskiPublisher:CengageGlencoe Algebra 1, Student Edition, 9780079039897...AlgebraISBN:9780079039897Author:CarterPublisher:McGraw HillFunctions and Change: A Modeling Approach to Coll...AlgebraISBN:9781337111348Author:Bruce Crauder, Benny Evans, Alan NoellPublisher:Cengage Learning