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?
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
Section: Chapter Questions
Problem 1PS
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Question
Mohammed is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $40,000 in an
(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:
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