1. Brian inherited $500,000 from his grandpa who passed away last month. How muc

Question

1. Brian inherited $500,000 from his grandpa who passed away last month. How much would he have monthly, if he bought a 30 year annuity whose payments start next month? Assume the interest rate is 6 percent per year?

2. Andy, has decided to put 1000 dollars in a bank starting today. He also plans to increase his monthly deposits by $250 over the course of next 4 months. If the bank pays 6% per year, how much Andy will have at the end of the 4 month period in his account?

3. What is the PV of an ordinary annuity with 100 monthly payments of $700 assuming a 6% annual
interest rate ?

Explanation / Answer

1. R= 500,000 ((.06/12 +1)^360)/(0.06/12) = $497.75 2. 1,000*(1+0.06/12)^4 + 250*(1+0.06/12)^3 + 250*(1+0.06/12)^2 +250*(1+0.06/12) = $1,777.68 3. PV = 700 ((1+ .06/4)^100 -1)/0.06) = $40,040,53

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