chapter 6

OT JU T0 years berore begthiing to Save and only make 35 payments into your retirement account? 6-4. (Related to Checkpoint 62 on page 165) (Present value of an ordinary annuity) Nicki Johnson, a sophomore mechanical engineering student, received a call from an insurance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her a fixed annual income. The annuities are as follows: Purchase Price of the Annuity Duration of the Annulty (Years) Amount of Money Received Per Year $8,500 $7,000 $8,000 Anmity $50,000 60,000 $70,000 12 25 20 Nicki could eam 11 percent on her money by placing it in a savings account. Alter- natively, she could place it in any of the above annuities. Which annuities in the table above, if any, will earn Nicki a higher ing 11 percent? return than investing in the savings account earn- 6-5. (Related to Checkpoint 6.1 on page 162) (Annuity payments) Mr. Bill S. Preston. Esq. purchased a new house for $80.000. He paid $20.000 up front on the down payment and agreed to pay the rest over the next 25 years in 25 equal annual payments that include principal payments plus 9 percent compound interest on the unpaid balance. What will these equal payments be? 6-6. (Annuity payments) Emily Morrison purchased a new house for S150.000. She paid $30.000 up front and agreed to pay the rest over the next 25 years in 25 equal annual payments that include principal payments plus 10 percent compound interest on the unpaid balance. What will these equal payments be