An annuity that pays out 30,000 a year for 20 years (paid at the beginning of each year) and b. leaves a bequest to her university that is a perpetuity-immediate that pays 6000 dollars a year. This perpetuity immediate starts AFTER the annuity in part (a) ends. Assuming a 6 percent nominal interest rate (converted monthly) for her savings and a 5 percent effective yearly interest rate for her retirement annuity and perpetuity what does she have to save each month
An annuity that pays out 30,000 a year for 20 years (paid at the beginning of each year) and b. leaves a bequest to her university that is a perpetuity-immediate that pays 6000 dollars a year. This perpetuity immediate starts AFTER the annuity in part (a) ends. Assuming a 6 percent nominal interest rate (converted monthly) for her savings and a 5 percent effective yearly interest rate for her retirement annuity and perpetuity what does she have to save each month
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 professor anticipates having a 30 year career in teaching. She wishes to save some money from each monthly paycheck that will fund the following:
a. An
b. leaves a bequest to her university that is a perpetuity-immediate that pays 6000 dollars a year. This perpetuity immediate starts AFTER the annuity in part (a) ends.
Assuming a 6 percent nominal interest rate (converted monthly) for her savings and a 5 percent effective yearly interest rate for her retirement annuity and perpetuity what does she have to save each month?
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Step 1 Introduction
VIEWStep 2 Calculation of future value of the annuity with 30 years of maturity
VIEWStep 3 Calculation of present value of perpetuity
VIEWStep 4 Calculation of Future value of Perpetuity for 10 years
VIEWStep 5 Summation of both Future value
VIEWStep 6 Calculation of savings needs to be done each month
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