A continuous annuity of $12,000 per year is to be funded by steady withdrawals from a savings account that earns 6% interest compounded continuously.(a) What is the smallest initial amount in the account thatwill fund such an annuity forever?(b) What initial amount will fund such an annuity for exactly20 years (at which time the savings account balance willbe zero)?
A continuous annuity of $12,000 per year is to be funded by steady withdrawals from a savings account that earns 6% interest compounded continuously.(a) What is the smallest initial amount in the account thatwill fund such an annuity forever?(b) What initial amount will fund such an annuity for exactly20 years (at which time the savings account balance willbe zero)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A continuous
(a) What is the smallest initial amount in the account that
will fund such an annuity forever?
(b) What initial amount will fund such an annuity for exactly
20 years (at which time the savings account balance will
be zero)?
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