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Question 1 10 pts Now that your uncle has decided to retire, he wants to buy an annuity that will provide him with $85,000 of
Question 1 10 pts Now that your uncle has decided to retire, he wants to buy an annuity that will provide him with $85,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.15%. How much would it cost him to buy the annuity today? $1,178,912 O $1,119,966 O $1,240,960 O $1,303,008 O $1,063,968 Question 2 10 pts Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to open a new restaurant, and your uncle offers to give you $120,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment? O 7.99% O 7.21% o 7.59% O 8.41% O 6.85% Question 3 10 pts What is the present value of the following cash flow stream at a rate of 6.25%? Years: 0 1 2 3 4 CFs: $0 $75 $225 $0 $300 O $411.57 O $456.03 O $505.30 O $480.03 O $433.23
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