Michael is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $38,000 payment each year for the next 15 years. Click here to view the factor table. Calculate how much Michael should be willing to pay for the annuity if he can invest his funds at 7%. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.) Payment $ eTextbook and Media
Michael is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $38,000 payment each year for the next 15 years. Click here to view the factor table. Calculate how much Michael should be willing to pay for the annuity if he can invest his funds at 7%. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.) Payment $ eTextbook and Media
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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Michael is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would
provide a $38,000 payment each year for the next years.
Click here to view the factor table.
Calculate how much Michael should be willing to pay for the annuity if he can invest his funds at 7%. (For calculation purposes, use 4
decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.)
Payment $
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Transcribed Image Text:APPENDIX 9.1 Present value of $1 received in n periods.
Periods 4%
12345
5
6
7
8
9
10
11
THERE
0.6496
0.6246
0.6006
14
0.5775
15 0.5553
12
13
16
17
18
19
20
PVRI
1
2
3
=
4
5
6
7
8
9
10
11
12445
13
16
17
18
19
20
5%
0.9615 0.9524
0.9246 0.9070
APPENDIX 9.2 Present value of an annuity of $1 per period.
Periods 4%
5%
6%
0.9615 0.9524 0.9434
1.8861 1.8594 1.8334
2.7751 2.7232 2.6730
3.6299 3.5460 3.4651
4.4518 4.3295 4.2124
0.8890 0.8638
0.8548 0.8227
0.8219 0.7835
PVA =
0.7903 0.7462 0.7050
0.6663
0.7599 0.7107 0.6651 0.6227
0.7307 0.6768 0.6274 0.5820
0.7026 0.6446 0.5919 0.5439
0.6756 0.6139 0.5584 0.5083
6%
7% 8% 9% 10% 11% 12% 13% 14% 16% 18% 20%
0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8621 0.8475 0.8333
0.8900 0.8734 0.8573 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7432 0.7182 0.6944
0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6407 0.6086 0.5787
0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5523 0.5158 0.4823
0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4761 0.4371 0.4019
$1
(1 + i)"
0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 0.1954 0.1619
0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1685 0.1372
0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1452 0.1163
0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1252 0.0985
0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1079 0.0835
0.6302 0.5963 0.5645 0.5346 0.5066 0.4803
0.4556 0.4104 0.3704 0.3349
0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3538 0.3139 0.2791
0.5403 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3050 0.2660 0.2326
0.5002 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2630 0.2255 0.1938
0.4632
0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2267 0.1911 0.1615
0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.2176 0.1883 0.1631 0.1415 0.1229 0.0930 0.0708
0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.1978 0.1696 0.1456 0.1252 0.1078 0.0802 0.0600
0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0691 0.0508
0.4746 0.3957 0.3305 0.2765 0.2317 0.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0596 0.0431 0.0313
0.4564 0.3769 0.3118 0.2584 0.2145 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0514 0.0365 0.0261
0.0541
0.0451
0.0376
5.2421 5.0757 4.9173
6.0021 5.7864 5.5824
6.7327 6.4632 6.2098
7.4353 7.1078 6.8017
8.1109 7.7217 7.3601
8.7605 8.3064 7.8869
9.3851 8.8633 8.3838
9.9856 9.3936 8.8527
10.5631 9.8986 9.2950
11.1184 10.3797 9.7122
0.1346
0.1122
0.0935
0.0779
0.0649
7%
8% 9% 10% 11% 12% 13% 14% 16% 18% 20%
0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8621 0.8475 0.8333
1.8080 1.7833 1.7591 1.7355
1.7125 1.6901 1.6681 1.6467 1.6052 1.5656 1.5278
2.6243 2.5771 2.5313 2.4868 2.4437 2.4018 2.3612 2.3216 2.2459 2.1743 2.1065
3.3872 3.3121 3.2397 3.1698 3.1024 3.0373 2.9745 2.9137 2.7982 2.6901 2.5887
4.1002 3.9927 3.8897 3.7907
3.6959 3.6048 3.5172 3.4331 3.2743 3.1272 2.9906
4.7665 4.6229 4.4859 4.3553 4.2305 4.1114 3.9975 3.8887 3.6847 3.4976 3.3255
5.3893 5.2064 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.0386 3.8115 3.6046
5.9713 5.7466 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.3436 4.0776 3.8372
6.5152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.6065 4.3030 4.0310
7.0236 6.7101 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 4.8332 4.4941 4.1925
7.4987 7.1390 6.8052 6.4951 6.2065 5.9377 5.6869 5.4527 5.0286 4.6560 4.3271
7.9427 7.5361 7.1607 6.8137 6.4924 6.1944 5.9176 5.6603 5.1971 4.7932 4.4392
8.3577 7.9038 7.4869 7.1034 6.7499 6.4235 6.1218 5.8424 5.3423 4.9095 4.5327
8.7455 8.2442 7.7862 7.3667 6.9819 6.6282 6.3025 6.0021 5.4675 5.0081 4.6106
9.1079 8.5595 8.0607 7.6061 7.1909 6.8109 6.4624 6.1422 5.5755 5.0916 4.6755
11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 7.8237 7.3792 6.9740 6.6039 6.2651 5.6685 5.1624 4.7296
12.1657 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.5488 7.1196 6.7291 6.3729 5.7487 5.2223 4.7746
12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 7.2497 6.8399 6.4674 5.8178 5.2732 4.8122
13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649
7.8393 7.3658 6.9380
6.5504 5.8775 5.3162 4.8435
13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 5.9288 5.3527 4.8696
1
(1 + i)"
i
$1-
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