Your father is about to retire and he wants to buy an annuity that will provide him with $85,000...
Question:
Your father is about to retire and he wants to buy an annuity that will provide him with $85,000 of income for 20 years with the first payment coming immediately. The going rate is 5.15%. How much would it cost him to buy the annuity?
Present value of annuity:
The present value of annuity is the discounted present value of equal future periodic cash flows to be received over a specified period of time. The value depends on the discount rate, the payment amount and the time period for which the payments are received.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerWe need to first calculate the present value of payments for 19 years. We do this as the formula for present value of annuity assumes payments made at...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
How to Calculate the Present Value of an Annuity
from
Chapter 8 / Lesson 3
5.2K
Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.
Related to this Question
- Because your father is about to retire, he wants to buy an annuity that will provide him with $75,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such a
- Your father is about to retire, and he wants to buy an annuity that will provide him with $84,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annui
- Your father is about to retire, and he wants to buy an annuity that will provide him with $58,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.15%. How much would it cost him to buy the an
- Your father is about to retire, and he wants to buy an annuity that will provide him with $91,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.15%. How much would it cost him to buy the an
- Because your mother is about to retire, she wants to buy an annuity that will provide her with $75,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such
- Your uncle is about to retire, and he wants to buy an annuity that will provide him with $10,000 of income a year for 30 years, with the first payment coming immediately. The going rate on such annuit
- Your uncle is about to retire, and he wants to buy an annuity that will provide him with $80,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. Required: How much would it cost him to b
- Your father is about to retire. His firm has given him the option of retiring with a lump sum of $50,000 or an annuity of $8,000 for ten years. Which is worth more now, if the discount rate is (a) 6%, (b) 18%?
- Your father is about to retire. His firm has given him the option of retiring with a lump sum of $20,000 or an annuity of $2,500 for 10 years. Which is worth more now, if an interest rate of 6 percent is used for the annuity?
- Your uncle is about to retire, and he wants to buy an annuity that will provide him with $75,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the ann
- Your uncle is about to retire, and he wants to buy an annuity that will provide him with $60,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.75%. How much would it cost him to buy the ann
- An investor is to receive a 15-years, $8,000 annuity, with the first payment to be received today. At an 11% discount rate, how much is this annuity worth today?
- Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the s
- Your father has $500,000 and wants to retire. He expects to live for another 20 years, and he also expects to earn 8% on his invested funds. How much could he withdraw at the beginning of each of the
- An annuity immediate paying 200 at the end of each year for 50 years with AEIR 5% is to be exchanged for a 25 year annuity immediate whose first payment is X, and where subsequently payments increase
- A 5-year annuity of 10 $9,000 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. Requirement 1: If the discount rate is 9 percent compounded semiannua
- Your father is planning to retire, and his employer has promised him a guaranteed but fixed income of $50,000 per year for the rest of his life. If the rate of inflation is 5% per year, how much in current dollars will the payment at the end of the 20th y
- Prof. Business wants a 23-year retirement annuity that begins 13 years from today with an equal annual payment equal to $90,000 today inflated at 2.5% annually over 13 years. Her first retirement annu
- Your Grandfather left you an inheritance that will provide an annual income for the next 20 years. You will receive the first payment one year from now in the amount of $16,500. Every year after that,
- Your grandfather left you an inheritance that will provide an annual income for the next 10 years. You will receive the first payment one year from now in the amount of $4,000. Every year after that,
- Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $11,600 a year forever, starting when he retires. If he can earn 7.6 percent annually, how much does your grandfather need to invest to produc
- Your father has $400,000 and wants to retire. He expects to live for another 20 years, and to be able to earn 10% on his invested funds. How much could he withdraw at the end of each of the next 20 ye
- Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $35,000 has today. (the real value of
- 1) Ean inherited an annuity worth $3,643.34 from his uncle. The annuity will pay him four equal payments of $1,100 at the end of each year. What rate of return is the annuity fund offering? a) 9.44%
- __________ is an annuity that provides its holder with payment dollars at the beginning of each year. a) An annuity due b) A warrant c) A perpetuity d) An ordinary annuity
- Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with an income of $40,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7.25%. How much would it cost
- You are currently 30 years old. You intend to retire at age 60, and you want to be able to receive a 20-year, $100,000 beginning-of-the-year annuity, with the first payment to be received on your 60th
- Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires, that is, until he is 85. He currently earns $40,000 per yea
- Charlie wants to retire in 30 years, and he wants to have an annuity of $1,000 a year for 20 years after retirement. Charlie wants to receive the first annuity payment at the end of the 30th year. Using an interest rate of 10%, how much must Charlie inves
- Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until is 85 years old. He wants a fixed retirement income that has the same purchasing power
- Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires until he is 85. He wants a fixed retirement income that has the same purchasing power at the t
- Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the
- An investor will receive an annuity of $5,000 a year for seven years. The first payment is to be received 5 years from today. If the annual interest rate is 11.5%, what is the present value of the annuity? A) $13,453 B) $15,000 C) $23,185
- California Life has just offered you a single premium annuity for $5,000 that will pay $5,144.12 per year for 20 years, the first payment being received exactly 31 years from today. What is the implied rate of return on this annuity? a. 7% b. 8% c. 9% d.
- Your grandfather left you an inheritance that will provide an annual income for the next 10 years. You will receive the first payment one year from now in the amount of $4,000. Every year after that, the payment amount will increase by 6%. What is your in
- Mathew plans to retire in 6 years from today with $1,000,000 in his retirement account. If he receives $175,000 per year from his account and he receives his first $175,000 payment in 6 years from today and his last $175,000 payment in 12 years from today
- Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $35,000
- Raul Inherited an annuity worth $7,046.13 from his uncle. The annuity will pay him seven equal payments of $1,400 at the end of each year. What rate of return is the annuity fund offering?
- Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,000 a year forever, starting when he retires. If he can earn 6.5% annually, how much does your grandfather need to invest to produce the d
- The Good Life Insurance Co. wants to sell you an annuity which will pay you $781 per quarter for 24 years. You want to earn a minimum rate of return of 7.62 percent APR. What is the most you are willing to pay as a lump sum today to buy this annuity?
- Assume that your father is now 40 years old, that he plans to retire in 20 years, and that he expects to live for 25 years after he retires, that is until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retir
- James inherited an annuity worth $2,493.10 from his uncle. The annuity will pay him three equal payments of $950 at the end of each year. What rate of return is the annuity fund offering? a.) 8.26%
- You just won the lottery, which promises you $200,000 per year for the next 20 years. You receive the first payment today (hint: annuity due). If your discount rate is 9.25%, what is the present value
- A 7-year annuity of 14 $9,700 semiannual payments will begin 10 years from now, with the first payment coming 10.5 years from now. If the discount rate is 11%, compounded semiannually, what is the val
- Your mother is planning to retire this year. Her firm has offered her a lump-sum retirement payment of $50,000 or a $6,000 lifetime annuity whichever she chooses. Your mother is in reasonably good hea
- Your mother is planning to retire this year. Her firm has offered her a lump-sum retirement payment of $50,000 or a $6,000 lifetime annuity whichever she chooses. Your mother is in reasonably good health and expects to live for at least 15 more years. Whi
- Question Your Grandfather left you an inheritance that will provide an annual income for the next 20 years. You will receive the first payment one year from now in the amount of $16,500. Every year af
- Assume that you own an annuity that will pay you $12,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle (who does not know finance but loves you very much) offers to give you $1
- Use BA II Plus Financial Calculator to solve these questions. An 8-year annuity of 16 $8,700 semiannual payments will begin 10 years from now, with the first payment coming 10.5 years from now. Requ
- You are now 20 years old and just beginning to save for retirement. If your retirement account will earn 6% compounded monthly and you plan to retire at the age of 50 with $1,200,000. How much do you
- An investor wishes to set up a retirement annuity by making semiannual deposits into an account which offers an annual stated rate of 12% per year compounded semiannually. The first of these semiannua
- Your father's employer was just acquired, and he was given a severance payment of $550,000, which he invested at a 3.5% annual rate. He now plans to retire, and he wants to withdraw $25,000 at the end
- The Good Life Insurance Co. wants to sell you an annuity which will pay you $680 per quarter for 20 years. You want to earn a minimum rate of return of 5.3 percent. What is the most you are willing to
- The Good Life Insurance Co. wants to sell you an annuity which will pay you $640 per quarter for 25 years. You want to earn a minimum rate of return of 4.9 per cent. What is the most you are willing
- Charlie wants to retire in 15 years, and he wants to have an annuity of $50,000 a year for 20 years after retirement. Charlie wants to receive the first annuity payment the day he retires. Using an interest rate of 8%, how much should Charlie invest today
- Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires, that is, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he reti
- Al is given a fifteen-year annuity with end-of-year payments. The first payment Al receives, precisely one year from the date he is given the annuity, is for $100, and then subsequent payments decreas
- You would like to have enough money saved to receive a growing annuity for 25 years, growing at a rate of 4% per year, with the first payment of $60,000 occurring exactly one year after retirement. How much would you need to save in your retirement fund t
- Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires - that is, until he is 85. He wants his first retirement pay
- Your pension plan is an annuity with a guaranteed return of 4% per year (compounded quarterly). You can afford to put $1,800 per quarter into the fund, and you will work for 40 years before retiring.
- A father wants to set aside money for his 5 year old son's future college education. Money can be deposited into a bank account that earns 8% per year compounded annually. What equal payments should be made by the father on his 6th through 17th birthdays
- Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $70,000 ("present value") at age 65, the firm will pay the retiring professor $500 a month until death. If
- A grandfather sets up a trust for his only grandchild. The trust consists of an annuity that will pay $5,000 monthly to the grandchild for 18 years. The annuity pays an annual return of 5% and makes t
- Your father paid 510.000 (cf occurs at t=0) for an investment that promises to pay $850 at the end of each of the next 5 years, then an additional lump sum payment of $12,000 at the end of the 5th year. What is the expected rate of return on this investme
- The Good Life Insurance Co. wants to sell you an annuity which will pay you $710 per quarter for 20 years. You want to earn a minimum rate of return of 5.6 percent. What is the most you are willing to
- The Good Life Insurance Co. wants to sell you an annuity which will pay you $670 per quarter for 25 years. You want to earn a minimum rate of return of 5.2 percent. What is the most you are willing to
- When I retire in May at the age of 69 years and 4 months. I want to have $4,020 in income per month in addition to my Social Security. Based on my average expected lifetime of 89.5 years, how much would have to be invested in a life income annuity earning
- An insurance company is trying to sell you a retirement annuity. The annuity will give you 20 payments with the first payment in 12 years when you retire. The insurance firm is asking you to pay $50,000 today. If this is a fair deal, what must the payment
- Please show how to complete A 9-year annuity of 18 $10,400 semiannual payments will begin 11 years from now, with the first payment coming 11.5 years from now. Requirement 1: If the discount rate is 8
- The Good Life Insurance Co. wants to sell you an annuity which will pay you $827 per quarter for 24 years. You want to earn a minimum rate of return of 9.92%APR. What is the most you are willing to pa
- If your father has the desire to retire in 17 years, how much money will he need to invest each year for the next 16 years (starting one year from today) to meet his goal of having $700,000 at retirem
- You want to retire in 20 years with a monthly retirement income of $4,800 per month (first payment at the end of the first month of retirement). You hope to live 30 years in retirement. You estimate that you can conservatively invest at 6% in retirement.
- Your grandmother left you an inheritance that will provide an annual income for 25 years. You will receive the first payment one year from now in the amount of $10,000. Every year after that, the paym
- You are going to pay $100 into an account at the beginning of each of the next 40 years. At the beginning of the 41st year you buy a 30 year annuity whose first payment comes at the end of the 41st ye
- You are going to pay $100 into an account at the beginning of each of the next 40 years. At the beginning of the 41st year, you buy a 30 year annuity whose first payment comes at the end of the 41st y
- Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $78,000 at age 65, the firm will pay the retiring professor $550 a month until death. a. If the professor
- Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $70,000 at age 65, the firm will pay the retiring professor $500 a month until death. If the professor's re
- Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $79,000 at age 65, the firm will pay the retiring professor $575 a month until death. a. If the professor'
- Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $87,000 at age 65, the firm will pay the retiring professor $775 a month until death. a. If the professor'
- Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $71,000 at age 65, the firm will pay the retiring professor $375 a month until death. a. If the professor'
- Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $72,000 at age 65, the firm will pay the retiring professor $400 a month until death. a. If the professor's
- Your girlfriend just won the Florida lottery. She has the choice of $15,900,000 today or a 20-year annuity of $1,050,000, with the first payment coming one year from today. What rate of return is buil
- Your girlfriend just won the Florida lottery. She has the choice of $15,000,000 today or a 20-year annuity of $1,050,000, with the first payment coming one year from today. What rate of return is buil
- Carl receives a 15 year annuity which makes payments at the beginning of each month. The payments during the first year are 10 dollar per month (the sum of the payments is 1,200 dollar over the first
- Contributing $1,500 to his retirement fund at the end of each year beginning at age 18 through age 50, with an average annual return of 12%, how much does Derrick have in his retirement account at thi
- 1) I have a retirement account that earns 5% per year. I will make 20 deposits of $2,000 per year starting this year. How much money will I have in this account in 30 years? 2) Your parents have $200
- Mark's father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires until he is 85. He wants a fixed retirement income that has the same purchasing power at the
- 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 profe
- Future value of an annuity - Your client is 35 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $3,000 per year; and you advise h
- Future value of an annuity - Your client is 36 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $5,000 per year; and you advise h
- A 15-payment annual annuity has its first payment in nine years. If the payment amount is $1,400 and the interest rate is 7 percent, what is the most you should be willing to pay today for this investment? a) $5,825.11 b) $12,751.08 c) $6,416.67 d) $7,421
- You win the Mightyball lottery, which promises a "$1 million" payout - yippeel But, there's a catch - your winnings will be paid as an annuity at a rate of $50,000 per year for 20 years, with the first payment beginning immediately. Alternatively, you may
- Jorge inherited an annuity worth $4, 335.57 from his uncle. The annuity will pay him seven equal payments of $950 at the end of each year. The annuity fund is offering a return of .................................
- Jasper is bequeathed a thirty-year deferred annuity that has a payment at the end of each third year. The first payment is for $15000 and is made five years after she receives inheritance. There is al
- An annuity that begins more than 1 year in the future is referred to as a(n): a. perpetuity b. annuity due c. uneven annuity d. deferred annuity
Explore our homework questions and answers library
Browse
by subject