Meghan purchases a retirement annuity that will pay her $1,000 at the end of every six months for the first nine years and $700 at the end of every month for the next three years. The annuity earns interest at a rate of 5% compounded quarterly.

Meghan purchases a retirement annuity that will pay her $1,000 at the end of every six months for the first nine years and $700 at the end of every month for the next three years. The annuity earns interest at a rate of 5% compounded quarterly.

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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Question

Meghan purchases a retirement annuity that will pay her $1,000 at the end of every
six months for the first nine years and $700 at the end of every month for the next
three years. The annuity earns interest at a rate of 5% compounded quarterly.

a. What was the purchase price of the annuity?
Round to the nearest cent
b. How much interest did Meghan receive from the annuity?
Round to the nearest cent

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