Professor's Annuity Corporation offers a lifetime annuity to retiring professors. For a payment...
Question:
Professor's Annuity Corporation offers a lifetime annuity to retiring professors. For a payment of $82,000 at age 65, the firm will pay the retiring professor $650 a month until death.
a. If the professor's remaining life expectancy is 20 years, what is the monthly interest rate on the annuity?
b. What is the effective annual interest rate?
c. If the monthly interest rate is 1%, what monthly annuity payment can the firm offer to the retiring professor?
Future Value of Annuity
Future Value of Annuity is used to find the value at a future date for series of payments made in future. If the interest rate changes, then the future value sum of individual cash flow would required to be determined the future value of annuity.
Answer and Explanation: 1
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View this answerGiven that Annuity, {eq}A {/eq} = $650, Future Value, {eq}FV {/eq} = $82,000
a. Since the life expectancy is 20 years, number of periods would be...
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How to Calculate Future Value: Formula & Example
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Chapter 5 / Lesson 16
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Understand the definition of future value and the future value formula. Explore some examples that show how to calculate the future value of an investment.
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