Question

Awira just purchased an annuity that will pay RM67,000 a year for 30 years. If the...

Awira just purchased an annuity that will pay RM67,000 a year for 30 years. If the interest offered is 11%, starting today. What was the purchase price for this annuity?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution) Amount per year (PMT) = RM67,000

Number of years (Nper) = 30

Rate = 11%

Since the payments stat today, hence, it is an annuity due. So, Type = 1

Future Value (FV) = 0

The present value is calculated using the PV function in Excel

= PV(Rate, Nper, PMT, FV, Type)

= PV(11%, 30, 67000, 0, 1)

= -$646,557.35

(Ignore negative sign)

The purchase price of the annuity = $646,557.35

Please comment in case of any doubts or clarifications required. Please Thumbs Up!!

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 30-year...
You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 30-year mortgage loan for 80 percent of the $3,000,000 purchase price. The monthly payment on this loan will be $14,000 starting 1 month from today. a) What is the periodic rate on this loan? b) What is the nominal rate of this loan? c) What is the effective rate on this loan? If you use a financial calculator please show the steps. Thank you.
Aperpetuity-immediate is designed to pay $5000 at the end of each year for 10 years and...
Aperpetuity-immediate is designed to pay $5000 at the end of each year for 10 years and then $1000 at the end of each year forever. The annual effective interest rate is 996. Determine a fair purchase price for this annuity. Purchase price = $ Aperpetuity-immediate is designed to pay $5000 at the end of each year for 10 years and then $1000 at the end of each year forever. The annual effective interest rate is 9%. Determine a fair purchase...
You are 35 years old. You have been offered the following annuity plan with the first...
You are 35 years old. You have been offered the following annuity plan with the first payment starting at age 40. - A yearly income of $200 for the next 5 years - A final lump sum payment of $10,000 on the final payment If interest rates today remains at 5% for the next 5 years, and then 6% for all remaining years, what is the fair price of this annuity plan?
An insurance agent just called your parents and offered them the opportunity to purchase an annuity...
An insurance agent just called your parents and offered them the opportunity to purchase an annuity for $21,074.25 that will pay them $4,000 per year for 20 years. What rate of return will they be earning on their $21,074.25? ***Please use financial calculator and write down the steps to get the answer***
Suppose a 65-year-old person wants to purchase an annuity from an insurance company that would pay...
Suppose a 65-year-old person wants to purchase an annuity from an insurance company that would pay $20,900 per year until the end of that person’s life. The insurance company expects this person to live for 15 more years and would be willing to pay 5 percent on the annuity. How much should the insurance company ask this person to pay for the annuity? b. A second 65-year-old person wants the same $20,900 annuity, but this person is healthier and is...
13. You own an ordinary annuity contract that will pay you RM3,000 per year for 12...
13. You own an ordinary annuity contract that will pay you RM3,000 per year for 12 years. You need money to pay back a loan in 6 years, and you are afraid if you get the annuity payments annually you will spend the money and not be able to pay back your loan. You decide to sell your annuity for a lump sum of cash to be paid to you five years from today. If the interest rate is 8%,...
Annuity interest​ rate)  Your folks just called and would like some advice from you. An insurance...
Annuity interest​ rate)  Your folks just called and would like some advice from you. An insurance agent just called them and offered them the opportunity to purchase an annuity for ​$15, 980.78 that will pay them ​$2,500 per year for 10 years. They​ don't have the slightest idea what return they would be making on their investment of ​$15 comma 980.78. What rate of return would they be​ earning? The annual rate of return your folks would be earning on...
what is the present value (or purchase price) of an annuity product which will pay you...
what is the present value (or purchase price) of an annuity product which will pay you $2000 at the end of each year for the next 15 years? Use an interest rate of 9%
Congratulations! You have just won the lottery ,which will pay you an annuity of $50,000 per...
Congratulations! You have just won the lottery ,which will pay you an annuity of $50,000 per year for the rest of your life. If you are 21 today and will die with certainty at 90, this means you will receive 70 payments of $50,000. Let’s say someone offers to give you $1,000,000 today in exchange for this annuity. If the interest rate is 5%, should you take this deal? Why or why not?
An insurance annuity offers to pay you $1,000 per quarter for 20 years starting immediately. If...
An insurance annuity offers to pay you $1,000 per quarter for 20 years starting immediately. If you want to earn an effective annual rate of return (EAR) of 6.5 percent, what is the most you are willing to pay as a lump sum today to obtain this annuity? A) $44,008.24 B) $45,840.95 C) $45,124.60 D) $44,927.59
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT