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 10 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=? 170915.91

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 10 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 flow=? This answer is not 302,787.96

c. What is the amount of the annuity purchase required if you wish to receive a fixed payment of $220,000 for 15 years? Assume that the annuity will earn 10 percent per year. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

present value=? 1673337.49

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 10 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 flow=? This answer is not 302,787.96

c. What is the amount of the annuity purchase required if you wish to receive a fixed payment of $220,000 for 15 years? Assume that the annuity will earn 10 percent per year. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

present value=? 1673337.49

Explanation / Answer

present value of annuity = payment per period * [ 1 - (1+i)^-n ]/i

Future value = present value * (1+r)^n

r = interest rate per period

n = number of periods

a)

x * [1-(1+10%)^-15]/10% = 1300000

annual payment x = 170915.91

b)

x * [1-(1+10%)^-15]/10% * 1/(1+10%)^6 = 1300000

=>

annual payment x = 30279.80

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.