Question 4 Sandy Beach purchased an investmentcontract on January 1, 2005 by pay

Question

Question 4

Sandy Beach purchased an investmentcontract on January 1, 2005 by paying $28,795. The investmentcontract will
pay Sandy $5,000 at the end of every year for a set number ofyears. Assuming the contract pays interest of 10%
compounded annually, how many payments of $5,000 will Sandyreceive?

Use the time value of money factors posted on carmen toanswer this question. To access these factors,
click on content and then scroll to the bottom and click on thelink labeled time value of money table
factors.

(a) 5 payments

(b) 6 payments

(c) 7 payments

(d) 8 payments

(e) 9 payments

(f) unable to determine from theinformation given

Question 4

Explanation / Answer

Given, Annual Payments ( PMT ) 5,000.00 Present Value of Annual Payments ( PV ) 28,795.00 ( PMT ) * PVF - OA PV 5000 * PVF - OA 28,795.00 PVF - OA 28,795 / 5,000 5.76 From the present Value tables, N = 9 corresponds with the factor 5.759 Hence , the answer is ( e ) 9payments

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