Question
Suppose you are going to receive a 10-year annuity with annual payments of $1,000. The first payment will be received at the end of Year
Suppose you are going to receive a 10-year annuity with annual payments of $1,000. The first payment will be received at the end of Year 1 and the last payment will be received at the end of Year 10. You will invest each payment in an account that pays 9 percent compounded annually. Although annuity payments stop at the end of year 10, you won't withdraw money from the account for another 25 years, and the account will continue to earn 9% for the entire 25-year period.
What will be the value in your account at the end of year 25 (rounded to the nearest dollar)?
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ANSWER To find the future value of the annuity we can use the formula FV PMT 1 rn 1 ...Get Instant Access to Expert-Tailored Solutions
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Get StartedRecommended Textbook for
Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
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