You are willing to pay $31,250 now to purchase a perpetuity that will pay you and your heirs $2,500 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this were a 40-year, annual payment, ordinary annuity instead of perpetuity?
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: When you retire, you plan to draw $50,000 per year from your retirement accounts, which will be…
A: Here, Annual payment = $50,000 Interest rate = 6% Number of periods = 10 years To Find: PV of…
Q: Joe wants to have $50,000 ten years from now to use for a down payment on a house. How much should…
A: Given: Future value = $50,000 Interest rate = 4.5% Years =10
Q: You have received a settlement from an insurance company which will pay you $100,000 per year for 12…
A: Present Value is the amount of money on hand currently, whereas future value is the amount of…
Q: a) How much is in your account on retirement? b) Suppose you set up your account as a perpetuity on…
A: “Since you have posted a question with multiple subparts, we will solve the first three subparts for…
Q: (Refer to this word problem In order to plan for their retirement, a married couple decides to…
A: Quarterly payment (Q) = P 50000 r = 8% per annum = 2% quarterly = 0.02 n = 10 years = 40 quarters
Q: To save for a down payment on a home, you invest in an annuity that pays 7.0% annual interest,…
A: The interest earned on the annuity can be calculated with the help of future value of annuity…
Q: Your uncle gives you $92,000 as a gift. Rather than give you a lump-sum, your uncle structures the…
A: Giftable amount (PV) is $92000 Annunity per year (PMT) is $16,250 Interest rate is 12% To Find:…
Q: 2. A friend who owns a perpetuity that promises to pay $1,000 at the end of each year, forever,…
A: Present value of a perpetuity amount With interest rate (i) and the perpetuity amount (A), the…
Q: Luis has $170,000 in his retirement account at his present company. Because he is assuming a…
A: This account works as a combination of two separate account: fixed principal of $170,000 compounded…
Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $73,000 of…
A: The provided information are: Particular Value RATE 5.25% YEARS 19 PMT (MONTHLY PAYMENT)…
Q: To help out with her retirement savings, Kaitlin invests in an ordinary annuity that earns 2.4%…
A: We will apply the required formula to calculate the quarterly payment, we will take the future value…
Q: You would like to have enough money saved to receive a growing annuity for 25 years, growing at a…
A: Solution-PV of growing annuityi=0.04r=0.12
Q: Kenneth decides to put away an amount of R400,00 for 15 years, at the end of every month, towards a…
A: The present value of the annuity can be calculated using PV Function in excel. PV (rate, nper, pmt,…
Q: You decide to provide yourself with a retirement account by depositing X into an account at the…
A: An immediate annuity is an ordinary annuity where the payments start immediately after being…
Q: You have a 401(k) plan, which is used for retirement savings, at work. If you plan to invest $5,000…
A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $5,300 of…
A: Calculate the present value of annuity as follows: Present value = Payment *(1-(1+rate)^-years)/Rate…
Q: You deposit $5000 each year into your retirement account, starting in one year. If these funds earn…
A: Annual deposit = $ 5000 Annual interest rate = 5% Number of annual deposits = 27
Q: How much must you deposit each year into your retirement account starting now and continuing through…
A: Monthly deposit It is the minimum deposit amount required to pay in an account each month by the…
Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $6,000 of…
A: RATE 15.25% YEARS 24 PMT (MONTHLY PAYMENT) 6000 FUTURE VALUE $0 FIRST PAYMENT IMMEDIATE…
Q: Bill is the owner of an ordinary annuity that will pay him $12,000 at the end of each of the next…
A: solution Bill is the owner of an ordinary annuity that will pay him $12,000 at the end of each of…
Q: How much money is needed now to establish a perpetuity that pays $2,000 at the end of every quarter…
A: given information perpetuity that pays at the end of every quarter = $2000 interest rate = 2.5% =…
Q: Linda expects to receive P35,569.22 , 9 years from now. How much should she invests for three…
A: Annuity is the series of payment made by an investor over the period of time to accumulate future…
Q: you are trying to determine how much you should save fc you can spend now. For retirement, you will…
A: You need to calculate present value of all objectives on given date.
Q: $500 per quarter for my retirement at 7.3% compounding quarterly for 32 years. I have a choice of…
A: The given problem can be solved using FV function in excel. FV function computes amount balance in…
Q: You would like to have enough money saved to receive a growing annuity for 25 years, growing at a…
A: The present value of the growing annuity is the current worth of a cash flow series growing at a…
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: Suppose a woman has decided to retire as soon as she has saved $800,000. Her plan is to put $950…
A: Given: Future value =$800,000 Deposits per month = $950 Annual interest rate =2.4% So, monthly rate…
Q: What is the maximum amount this couple can contribute to a Roth IRA?
A: Roth IRA is a specific retirement account in which the individual has to pay taxes on the amount…
Q: You would like to have enough money saved to receive a $90,000 per year perpetuity after retirement.…
A: Given, The cashflows is $90,000 The rate of interest is 8%
Q: How much should you invest each quarter if you can earn a rate of 4.8% compounded quarterly? How…
A: To find the payment per quarter one can use “ pmt function “ in excel. To find the total money we…
Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $7,100 of…
A: Immediate annuity payments are brought by investors by paying company in lump sum. Formula for…
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: You are offered the opportunity to put some money away for retirement. You will receive four annual…
A: The present value is the value of the sum received at time 0 or the current period. It is the value…
Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $5,300 of…
A: The today’s cost can be calculated using the PV function of excel. Inputs of the PV function will…
Q: Suppose you invest in an annuity that pays 5% interest, compounded semiannually. How much will you…
A: Formula used as follows: S=R1+in-1iS=Future valuei=Interest rate per periodn=Number of…
Q: If you receive an inheritance of $10,000 today, how long do you have to invest it at 8% per year to…
A: Given information: Present Value = $10,000 Interest Rate = 8% Annuity Payouts = $2,000
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: You are planning to save for your retirement during the next 30 years. You want to be able to…
A: EAR = (1+apr/n)^n - 1 EAR = (1+8%/12)^12 - 1 = 8.299951% Now let us find out the present value of…
Q: t cost her to buy such an annuity today
A: SOLUTION: Present Value =C×[1−(1+i)−n/i] =$50,000×[1-(1+0.725)]-30/0.725…
Q: It is estimated that you will pay about $80,000 into the Social Security system (FICA) over your…
A: The future value is the value of the equal deposits at the end of the deposit period. The…
Q: Mr. Chew, a retiree, expects to live for the next 20 years and would like to receive a regular…
A: An annuity is the fixed payment that an investor receives from an investment or fixed deposits made…
Q: You decide to replace your income of $70,000 a year in retirement for 30 years. How much do you need…
A: Interest rate (r)= 3% Compounding (k)= annually Time period (n)= 30 years Retirement Income (d)=…
Q: The Nelson family wants to save money to travel the world. They plan to invest in an ordinary…
A: Annuity means a series of finite number of payments which are the same in size and occurred at equal…
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…
Q: You are planning on retiring for retirement 34 years from now. You plan to invest $4,200 per year…
A: Future value of annuity (FVA) is the value of stream of recurring cashflow at regular interval…
You are willing to pay $31,250 now to purchase a perpetuity that will pay you and your heirs $2,500 each year, forever, starting at the end of this year. If your required
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- A friend who owns a perpetuity that promises to pay $1,000 at the end of each year, forever, comes to you and offers to sell you all of the payments to be received after the 25th year for a price of $1,001. At an interest rate of 10%, should you pay the $1,000 today to receive payment numbers 26 and onwards? What does this suggest to you about the value of perpetual payments?Mr. Chew, a retiree, expects to live for the next 20 years and would like to receive a regular retirement income by purchasing an immediate annuity. His desired retirement income is $24,000 per year. The regular pay out is paid immediately on purchase of the annuity. The projected rate of return of the annuity product is 2.5%. To purchase the annuity today, how much Mr Chew would require a lump sum of?You would like to have enough money saved to receive a $90,000 per year perpetuity after retirement. The annual interest rate is 8 percent. Required: How much would you need to have saved in your retirement fund to achieve this goal? a) Assume that the perpetuity payments start on the day of your retirement. b) Assume that the perpetuity payments start one year from the date of your retirement.
- To supplement your retirement, you estimate that you need to accumulate $290,000 exactly 41 years from today. You plan to make equal, end-of-year deposits into an account paying 8% annual interest. a. How large must the annual deposits be to create the $290,000 fund by the end of 41 years? b. If you can afford to deposit only $800 per year into the account, how much will you have accumulated in 41 years?Suppose today is January 1, 2024 and you are given two options: a. an annuity that pays you 1000 dollars at the end of each year until January 1, 2030 starting from now; b. a perpetuity that pays you 1000 dollars at the end of each year, but the first cash payment is at the end of year 2034. In other words, the perpetuity starts after 10 years from today. Which of the options do you choose if the long-term value of APR is 5% compounded annually? Does your answer change if the rate is 10%? Explain your solutions.heirs 2. You are willing to pay. $15,625 now to purchase a perpetuity which will pay you $1,350 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, ordinary annuity instead of a perpetuity? and your
- Your uncle is about to retire, and he wants to buy an annuity that will provide him with $7,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?Suppose you wish to retire forty years from today. You determine that you need $50,000 per year once you retire, with the first retirement funds withdrawn one year from the day you retire. You estimate that you will earn 6% per year on your retirement funds and that you will need funds up to 25 years after retirement. Use the PV of an ordinary annuity due formula. a) Calculate the amount you must deposit in an account today so that you have enough funds for retirement b) Calculate the amount you must deposit each year, starting one year from today, so that you have enough funds for retirement.2. A friend who owns a perpetuity that promises to pay $1,000 at the end of each year,forever, comes to you and offers to sell you all of the payments to be received after the25th year for a price of $1,000. At an interest rate of 10%, should you pay the $1,000today to receive payment numbers 26 and onwards? What does this suggest to youabout the value of perpetual payments?
- You plan to retire in 20 years. At the point of retirement, you want to be able to withdraw 25478 at the end of each year forever. Assume that you earn a 7.11% rate of return prior to retirement and an 4.54% rate of return after retirement. If you do not want to make any further contributions to your retirement fund, how much do you need today? Round answer to the nearest dollar.3. Rico wants to buy a retirement annuity that will pay him the first of 50 semiannual payments of $10,000 ten years from now. How much must he pay to purchase the annuity today if the annuity issuer provides a return on Investment of 4.8% compounded semiannually? I will solve this problem as: an ordinary deferred annuity a deferred annulty due Timeline: Solution:Your uncle is about to retire, and he wants to puy an annuity that will provide him with $95,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 4.70%. How much would it cost him to buy the annuity today? a. $1,271,700.48 b. $1,309,613.64 c. $1,232,005.40 d. $1,214,613.64 e. $1,250,824.87