You hire Thomas to work for you for five years, and you agree to put away enough
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You hire Thomas to work for you for five years, and you agree to put away enough money as a lump sum now to fund an annuity for him. At the end of those five years, he will retire and may begin drawing out $20,000 per year for five years, starting on the last day of each year (in this case, the end of year 6, from when this arrangement began, through year 10). How much must you invest today if your guaranteed interest rate is 3% compounded annually for all 10 years?
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Amount invested today 20000 10000 5000 5000 In the first year 5000 invested at 3 600 years of annuit...View the full answer
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