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 25-year annuity is $1.9 million and the annuity earns a guaranteed annual return of 11 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 25-year annuity is $1.9 million and the annuity earns a guaranteed annual return of 11 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 $290,000 for 25 years? Assume that the annuity will earn 11 percent per year. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Present value $______________

B. Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 25-year annuity is $1.9 million and the annuity earns a guaranteed annual return of 11 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 $_______________

Explanation / Answer

a)

Present value of annuity = P×[1-(1÷(1+r)^n)]÷r

r is interest rate per period

P is payment per period

n is number of payments

$1,900,000 = P×[1-(1÷(1+11%)^25)]÷11%

Annual payment, P = $225,606.46

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

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