Question
P5-19 For each case in the accompanying table, answer the questions that follow. a. Calculate the future value of the annuity assuming that it is
| P5-19 | For each case in the accompanying table, answer the questions that follow. | ||||||
| a. | Calculate the future value of the annuity assuming that it is | ||||||
| Case | Amount of Annuity | Interest rate | Deposit period | (1) Ordinary Annuity | (2) Annuity Due | ||
| A | $2,500 | 8% | 10 | ||||
| B | $500 | 12% | 6 | ||||
| C | $30,000 | 20% | 5 | ||||
| D | $11,500 | 9% | 8 | ||||
| E | $6,000 | 14% | 30 | ||||
| b. | Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity - ordinary or annuity due - is preferable? Explain why. | ||||||
| Type answer here | |||||||
| P5-23 | An insurance agent is trying to sell you an immediate-retirement annuity, which for a single amount paid today will provide you with $12,000 at the end of each year for the next 25 years. You currently earn 9% on low-risk investments comparable to the retirement annuity. Ignoring taxes, what is the most your would pay for this annuity? | ||||||
| LG 3: Personal finance: Funding your retirement | |||||||
| PVA = PMT | |||||||
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The Economics Of Money Banking And Financial Markets
Authors: Frederic S. Mishkin
7th Edition
0321122356, 978-0321122353
