Question

sal purchases two 20 year annuities immediate for 1000 each. the first annuity has annual payments and was priced at 5.8% annual effective rate. the second annuity has semi annual payments and was priced at 5.4% convertible semiannually. sal deposits all payments from two annuities into an account that pays an annual effective rate of 6%. what is the balance in Sal’s account at the end of 20 years?

Answer 1

Annuity-1
Amount of Annuity				1000
Divide: Annuity PVF at 5.80% for 20 yrs				11.65849
Annual payment				85.7744
Annuity -2
Amount of annuity				1000
Divide: Annuity PVF at 2.70% for 40 periods				24.27798
Semi annual payment				41.19
Annuity -1
Annual Payment				85.77
Multiply: Annuity FVF at 6% for 20 periods				36.7856
Amount at the end of 20 yrs					3155.101
Annuity -2
Semi annual payment				41.19
Multiply: Annuity FVF at 3% for 40 periods				75.4013
Amount at the end of 20 yrs					3105.78
Total Balance in the account					6260.88