Score: 0 of 1 pt 21 of 22 (19 complete) HW Score: 77.27%, 17 of 22 pts X BE7-16

Question

Score: 0 of 1 pt 21 of 22 (19 complete) HW Score: 77.27%, 17 of 22 pts X BE7-16 (similar to) Question Help * Hostess LLP must withdraw $55,000 at the beginning of each semiannual period Click the icon to view the Future Value of $1 (Click the icon to view the Future Value of an Ordinary Annuity table.) (Click the icon to view the Future Value of an Annuity Due table.) or the next eight years to satisfy its employeepension obigation. Assuming 8% interest with semiannual compounding, how much should the corporation invest ble e @ (Click the icon to view the Present Value of $1 table.) today? Draw a timeline to ilustrate the problem. ) (Cck theicontoviewthe Present Value of an Ordinary Annuity table.) Click the icon to view the Present Value of an Annuity Due table.) How much should the corporation invest today? (Use the present value and future value tables, a financial calculator, a spreadsheet or the formula method for you calculations. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.2X0XXX. Round your final answer to the nearest cent, SX.Xx) The corporation should invest $ today. Enter any number in the edit flelds and then click Check Answer. Clear All Check Answer rernaining

Explanation / Answer

PV of annuity due = P + P ([1 - (1 + r)-(n - 1) ] / r)

where P = periodic payment = $55,000

r = rate per period = 4

n = number of periods = 16

PV of annuity due = 55,000 + 55,000 ([1 - (1 + 0.04)-(16-1) ] / 0.04)

= 55,000 + 55,000 ([1 - 0.5552645027] / 0.04)

= 55000 + 55000 (0.4447354973 / 0.04)

= 55000 + (55000 * 11.1183874325)

= 55000 + 611511.31

= $666,511.31 Ans.

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