a. Calculate the annual cash flows (annuity payments) from a fixed-payment annui

Question

a.
Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 15-year annuity is $1.3 million and the annuity earns a guaranteed annual return of 12 percent. The payments are to begin at the end of the current year. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Annual cash flows $__________

b.
Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 15-year annuity is $1.3 million and the annuity earns a guaranteed annual return of 12 percent. The payments are to begin at the end of seven years. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Annual cash flows $__________

c.
What is the amount of the annuity purchase required if you wish to receive a fixed payment of $230,000 for 15 years? Assume that the annuity will earn 12 percent per year. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Present value $_____________

Explanation / Answer

So

PV= A*((1+r)^n-1)/r*(1+r)^N

so

1,300,000=A*(1.12^15-1)/.12*1.12^15

A=174720

similarly calculate the rest

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