Problems anceLab Annuities exeroises online 1. (Future value of an ordinary annuity) nstant feedback What is the future value of each of the following streams of payments? a. $500 a year for 10 years compounded annually at 5 percent b. S100 a year for 5 years compounded annually at 10 percent e. $35 a year for 7 years compounded annually at 7 percent d. $25 a year for 3 years compounded annually at 2 percent (Related to Checkpoint 2) (Present value of an ordinary annuity) What is the present value of the following annuities? 2. a. $2,500 a year for 10 years discounted back to the present at 7 percent b. $70 a year for 3 years discounted back to the present at 3 . $280 a year for 7 years discounted back to the present at 6 percent d. 3500 a year for 10 years discounted back to the present at 10 percent (Related to The Business of Life: Saving for Retirement) (Future value of an ord annuity) You are graduating from college at the end of this semester and after ing the The Business of Life box in this chapter, you have decided to invest $5,000 the end of each year into a Roth IRA for the next 45 years. If you earn 8 percent com pounded annually on your investment, how much will you have when you retire in 45 years? How much will you have if you wait 10 years before beginning to save and only make 35 payments into your retirement account? 3. read. (Related to Checkpoint 2) (Present value of an ordinary annuity) Nicki Johnson. a sophomore mechanical engineering student, received a call from an insurance a 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: 4. gent of MoneyDuration of the Annuity Received PeYear Annuity (Years) of the Annuity $50,000 560,000 $70,000 $8,500 $7,000 $8,000 12 25 20 Nicki could earn 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 ean Nicki a higher return than investing in the savings account ean ing 11 percent? 5. (Related to Checkpoint 1) (Annuity payments) Mr. Bill S. Preston, Esq, purchasco new house for $80,000. He paid $20,000 up front on the down payment and agreed 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. (Annuity payments) Emily Morrison purchased a new house for $150,000. She paid $30,000 up front and agreed to pay the rest over the next 25 years in 25 equal annuai payments that include principal payments plus 10 percent compound interest on unpaid balance, What will these equal payments be
