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?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 39P
Related questions
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
![](/static/compass_v2/shared-icons/check-mark.png)
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:
Step by step
Solved in 3 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT