Question

4) Given 800,000 in current savings, and an expected remaining life expectancy of 15 years, inflation of 3%, and investment r of 8%,

a) what annuity due could be purchased?

b) what annuity due could be purchased leaving 200,000 behind in 15 years (current dollars, not inflation adjusted).

Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

We are using BGN(BEGIN) mode on the calculator as it is an annuity due.

For that press 2nd + PMT

Then Press 2nd + Enter. You will be in BGN Mode.

a. Using Financial Calculator:

N = 15

I/Y = ((1.08/1.03)-1)*100% = 4.85437

PV = -800,000

FV= 0

CPT Press PMT = 72,783.80

Annuity due value per year = 72,783.80

b.

Using a Financial Calculator:

N = 15

I/Y = ((1.08/1.03)-1)*100% = 4.85437

PV = -800,000

FV= 200,000

CPT Press PMT = 63,847.11

Answer: Annuity due value per year =63,847.11

Alternative way:

Traditional way:

Formula: The present value of an annuity due (PV)

PV = {C× [1-(1+r)^-n]/r}×(1+r)}

PV = Present value (The cumulative amount available at Present).

C= Periodic cash flow.

r =effective interest rate for the period.

n = number of periods.

800,000= {C× [1-(1+4.85437%)^-15]/ 4.85437%}×(1+4.85437%)}

C = 72,783.80

4) Given 800,000 in current savings, and an expected remaining
life expectancy of 15 years, inflation of 3%, and investment r of
8%,
b) what annuity due could be purchased leaving 200,000 behind in
15 years (current dollars, not inflation adjusted).

Do women and men differ in how they perceive their life
expectancy? A researcher asked a sample of men and women to
indicate their life expectancy. This was compared with values from
actuarial tables, and the relative percent difference was computed;
perceived life expectancy minus life expectancy from actuarial
tables was divided by life expectancy from actuarial tables and
converted to a percent. The relative percent differences for all
men and women over the age of 7070 in the sample...

1 . An employee retiring from a firm after 36 years of service
at age 68 has earned a pension of $63,000 per year paid in
quarterly payments of $15,750. His expected life expectancy is 12
years further at age 80. The pension payments would end when he
dies.
a. Given a 16% discount rate based on the investment risk of his
employer, what is the lump sum value of the pension when he
retires? Excerpts from the Present Value...

show all works
1. The real risk-free rate of interest is 1%. Inflation is
expected to be 4% the next 2 years and 7% during the next 3 years
after that. Assume that the maturity risk premium is zero. What is
the yield on 3-year Treasury securities? (5 points)
2. The real risk-free rate of interest is 2.5%. Inflation is
expected to be 2% the next 2 years and 4% during the next 3 years
after that. Assume that the...

1. Madsen Motors's bonds have 15 years remaining to maturity.
Interest is paid annually, they have a $1,000 par value, the coupon
interest rate is 7%, and the yield to maturity is 9%. What is the
bond's current market price? Round your answer to the nearest
cent.
2. A bond has a $1,000 par value, 12 years to maturity, and a 9%
annual coupon and sells for $1,110.
What is its yield to maturity (YTM)? Round your answer to two...

A certain engine lathe can be purchased for ?$140,000 and
depreciated over three years to a zero salvage value with the SL
method. This machine will produce metal parts that will generate
revenues of ?$85,000 ?(time zero? dollars) per year. It is a policy
of the company that the annual revenues will be increased each year
to keep pace with the general inflation? rate, which is expected to
average 4?% / year ?(f equals=0.04). ?Labor, materials,
and utilities totaling ?$20,000...

A concrete fabricating machine was purchased 12 years ago for
$75,000 with an estimated life of 15 years and $15,000 salvage.
Straight-line depreciation has been used. This machine produces
parts at the rate of 3.54 hours per 100 parts, and has an
efficiency rating of 78%. The machine requires 3 operators paid a
wage rate of $14.76 per hour. The machine is run on one shift only
(eight hours per day is regular time), with overtime scheduled as
necessary. Demand...

2. Suppose you will receive $1,000 in 4 years. If your
opportunity cost is 6% annually, what is the present value of this
amount if interest is compounded every six months? (8 points) What
is the effective annual rate? (8 points) 3. Suppose you have
deposited $10,000 in your high-yield saving account today. The
savings account pays an annual interest rate of 4%, compounded
semi-annually. Two years from today you will withdraw R dollars.
You will continue to make additional...

15. Shao Airlines is considering the purchase of two alternative
planes. Plane A has an expected life of 5 years, will cost $100
million, and will produce net cash flows of $29 million per year.
Plane B has a life of 10 years, will cost $132 million, and will
produce net cash flows of $24 million per year. Shao plans to serve
the route for only 10 years. Inflation in operating costs, airplane
costs, and fares are expected to be...

3.) The real risk-free rate is 2%, and inflation is expected to
be 3% for the next 2 years. A 2-year Treasury security yields 5.6%.
What is the maturity risk premium for the 2-year security? Round
your answer to one decimal place.
4.) Renfro Rentals has issued bonds that have an 8% coupon rate,
payable semiannually. The bonds mature in 10 years, have a face
value of $1,000, and a yield to maturity of 7.5%. What is the price
of...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 15 minutes ago

asked 20 minutes ago

asked 36 minutes ago

asked 37 minutes ago

asked 45 minutes ago

asked 49 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago