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Your friend offers to pay you $20,000 at the end of each year for 4 years in exchange for cash today. The annual interest rate
- Your friend offers to pay you $20,000 at the end of each year for 4 years in exchange for cash today. The annual interest rate is 5%. What is the maximum amount of cash you should provide to your friend? (Draw a timeline and show your work.)
- Mr. Johnson wants to buy an annuity due that will provide him with income of $50,000 per year for six years. The going interest rate is 6.25%. How much would it cost him to buy the annuity today? (Draw a timeline and show your work.)
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