Assume that you just inherited an annuity that will pay you $10,000 per year for10 years, with the first payment being made today. A friend of your mother offersto give you $60,000 for the annuity. If you sell it, what rate of return would yourmother’s friend earn on his investment? If you think a “fair” return would be 6%, howmuch should you ask for the annuity? (13.70%, $78,016.92)
Assume that you just inherited an annuity that will pay you $10,000 per year for10 years, with the first payment being made today. A friend of your mother offersto give you $60,000 for the annuity. If you sell it, what rate of return would yourmother’s friend earn on his investment? If you think a “fair” return would be 6%, howmuch should you ask for the annuity? (13.70%, $78,016.92)
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 19P
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Question
Assume that you just inherited an
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
mother’s friend earn on his investment? If you think a “fair” return would be 6%, how
much should you ask for the annuity? (13.70%, $78,016.92)
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