Question
1) A retirement home at Deer Trail Estates now costs $ 126,000. Inflation is expected to cause this price to increase at 4% per year
1) A retirement home at Deer Trail Estates now costs $ 126,000. Inflation is expected to cause this price to increase at 4% per year over the 21 years before C. L. Donovan retires. How large an equal annual end-of-year deposit must be made each year into an account paying an annual interest rate of 12% for Donovan to have the cash to purchase a home at retirement?
A) The equal, annual end-of-year deposit to be made each year into the account is ? Round to nearest cent
2) Amount of annuity $ 18,000 Interste rate 8% Period (years) 10
Calculate the present value of the annuity assuming that it is
A) An ordinary annuity?
B) An annuity due ?
C) Compare your findings in A and B All else being identical, which type of annuity--ordinary or annuity due yields a higher present value. Explain why?
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