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What is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 20-year annuity of $7,500
What is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 20-year annuity of $7,500 per year at the current interest rate of 10 percent per year. What happens to the value of your investment if interest rates suddenly drop to 5 percent? What if interest rates suddenly rise to 15 percent? $ # of years Annuity payment per year Interest rate Interest rate Interest rate 20 7,500 10% 5% 15% Complete the following analysis. Do not hard code values in your answers. All answers should be positive values. Value of investment at 10% Value of investment at 5% Value of investment at 15%
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