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You worked hard for 35 years, and now it is your turn to relax and travel. You have decided to downsize to facilitate your new
You worked hard for 35 years, and now it is your turn to relax and travel. You have decided to downsize to facilitate your new travelling lifestyle. During this process, the following occurred:
- You sold your house at a price equivalent to an increase in value of 4.72% annually.
- At your age, you are not eligible for a mortgage, so you purchased your new place with cash.
- You purchased a smaller, more efficient vehicle by trading your old car for $2,700 and paying the remainder in cash.
- You invested in bonds to ensure money is available for your grandchildrens education. You made the following investments when the market rate for similar securities was 5% compounded semi-annually:
- 10-year bonds with a face value of $20,000 paying interest at 6.5% semi-annually
- 5-year bonds with a face value of $20,000 paying interest at 3.7% semi-annually.
- With all the money left, you purchased an annuity that will make weekly payments for the rest of your life. The nominal annual interest rate for this annuity is 3.7% compounded weekly.
Questions:
- What were the proceeds of your house sale?
- What were the prices of the bonds?
- How much did you pay for the annuity?
- What is the amount of the weekly payment you will receive for the rest of your life?
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