a. Calculate the annual cash flows (annuity payments) from a fixed-payment annui
ID: 2793975 • Letter: A
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
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