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Chapter 4: Q10BP-d (page 282)

How much would you have to invest today to receive

d. $50,000 each year for 50 years at 7 percent?

Short Answer

Expert verified

An investor has to invest $690,037.31 today in order to receive $50,000 each year for 50 years.

Step by step solution

01

Identification of the required information

Payment (PMT) = $50,000

Period (n) = 50 year

Interest Rate (i) = 7%

02

Present value (PV)

PV=PMT脳1-1+i-ni=$50,000脳1-1+7%-507%=$690,037.31

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Most popular questions from this chapter

Christy Reed made a \(2,000 deposit in her savings account on her 21st birthday, and she has made another \)2,000 deposit on every birthday since then. Her account earns 7 percent compounded annually. How much will she have in the account after she makes the deposit on her 32nd birthday?

If you invest $8,500 per period for the following number of periods, how much would you have? a. 12 years at 10 percent.

Question: As stated in the chapter, annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an exception occurs when the annuity payments come at the beginning of each period (termed an annuity due). To find the present value of an annuity due, the annuity formula must be adjusted as to the following: PVAD 5 A 3 ( 12 1 ________ (11i) n 21 ___________ i 11) The Capital Budgeting Process blo7716x_ch09_255-294.indd 284. Likewise, the formula for the future value of an annuity due requires a modification: FVAD 5 A 3 ( (11i) n11 21 ___________ i 21). What is the future value of a 15-year annuity of $1,800 per period where payments come at the beginning of each period? The interest rate is 12 percent.

How much would you have to invest today to receive b. $20,000 in 12 years at 13 percent?

Question: You wish to retire in 14 years, at which time you want to have accumulated enough money to receive an annual annuity of \(17,000 for 19 years after retirement. During the period before retirement you can earn 8 percent annually, while after retirement you can earn 10 percent on your money. What annual contributions to the retirement fund will allow you to receive the \)17,000 annuity?
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