Mohammed is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $40,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 10%, what income can Mr. Mohammed expect to receive each year?

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
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Mohammed is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $40,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 10%, what income can Mr. Mohammed expect to receive each year?

(Choose the correct answer from below options and attach all your explanations in the other link provided)


 

 

Select one:
a. 27256
b. 272
c. 2725
d. 272560
Expert Solution
Step 1

Calculation of annuity income:

Answer:

Annuity income can Mohammed expect to receive each year is $5,870.53

The given options are wrong.

Step 2

Calculation of annuity income will receive every year:

Excel spreadsheet:

Finance homework question answer, step 2, image 1

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