2. An brokage house employee is trying to sell you investment instrument, which for a single amount paid today will provide you with $25,000 at the end of each year for the next 19 years and $30,000 at the end of year 20. You currently earn 5% on low-risk investments comparable to the retirement annuity. Ignoring taxes, what is the most you would pay for this financial instrument?

2. An brokage house employee is trying to sell you investment instrument, which for a single amount paid today will provide you with $25,000 at the end of each year for the next 19 years and $30,000 at the end of year 20. You currently earn 5% on low-risk investments comparable to the retirement annuity. Ignoring taxes, what is the most you would pay for this financial instrument?

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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Similar questions

Assume that you just inherited an annuity that will pay you $10,000 per year for 10 years, with the first payment being made today. A friend of your mother offers to give you $60,000 for the annuity. If you sell it, what rate of return would your mother’s friend earn on his investment? If you think a “fair” return would be 6%, how much should you ask for the annuity? What keys do I need to enter in a financial calculator to get the answers of (13.70%, $78,016.92)/ only show me the keys to enter in a financial calculaotr. not excel and not algebra
The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $15,000 per year forever. If the required return on this investment is 8 percent, how much will you pay for the policy? Suppose the Perpetual Life Insurance Co. told you the policy costs $195,000. At what interest rate would this be a fair deal? Please do not answer in handwritten..thanku
Suppose that your retirement benefits during your first year of retirement are $60,000 per year which is just enough to meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of 5% due to inflation. If there is no cost-of-living adjustment in your retirement pension, then some of your future living cost has to come from savings other than retirement pension. If your saving account earns 7% interest a year, how much should you set aside in order to meet this future increase in the cost of living for 25 years? O $428,985.67 O S1,128,200.66 O $699,214.99 O $34,960.75
A company offers you employment for the next 30 years until retirement but will not pay you a pension when you do retire, so you start investing now for your retirement. You know you can earn 5% compounded monthly on an available investment for the next 30 years until you retire. During retirement you will earn 6% compounded annually on any funds remaining in the investment, and you expect to withdraw $110.000 at the end of each year of your retirement. If you anticipate living 20 years in retirement, how much of your salary as a minimum would you have to invest at the end of each year until retirement?
Suppose you are offered the alternative of receiving either $2,007 at the end of five years or $1,500 today. There is no question that the $2.007 will be paid in full (i.e., there's no risk of nonreceipt). Assuming that the money will not be needed in the next five years, you would deposit the $1.500 in an account that pays i% interest. What value of i would make you indifferent to your choice between $1.500 today and the promise of $2,007 at the end of five years?
Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $160,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment? O 2.28% O 2.20% O 2.22% 2.33% 2.59%
To save for a down payment on a home, suppose you decide to invest in an annuity that pays 7.0% annual interest, compounded annually. If you contribute $8,000 every year for 5 years, how much interest would you earn during the 5years? Enter your answer, rounded to the nearest cent, without the dollar sign or comma ($21,678.1235 should be entered as 21678.12.)
Suppose that you wish to buy a new home that will cost you $452,847. You must put $80,000 down, and the bank offers you a 5-year 5.1% APR negative amortization loan with a payments $1,258 per month, and a balloon payment of $92,233 (your 360th payment). How much will your remaining payments be?
The Perpetual Life Insurance Company is trying to sell you an investment policy that will pay you and your heirs $19,500 per year forever. a. If the required return on this investment is 6.1 percent, how much will you pay for the policy? b. Suppose the Perpetual Life Insurance Company told you the policy costs $500,000. At what discount rate would this be a fair deal?
ou decide to replace your income of $70,000 a year in retirement for 30 years. How much do you need in your retirement account the day you retire to make that happen, assuming a real interest rate of 3%?
4. You wish to purchase a house that costs $294,000, and the bank requires you to have 12% of the purchase price as a down payment. Your annual salary is $44,000 and you can save 18% of this salary every year. How long will it take for you to save for the required down payment? about _____ years?
Your friend offers to pay you an annuity of $6,800 at the end of each year for 3 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? Select the correct answer. a. $18,349.15 b. $18,345.95 c. $18,342.75 d. $18,339.55 e. $18,336.35

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