You deposit $13,000 annually into a life insurance fund for the next 10 years, after which time you plan to retire. a. If the deposits are made at the beginning of the year and earn an interest rate of 8 percent, what will be the amount in the retirement fund at the end of year 10? Future value= S b. Instead of a lump sum, you wish to receive annuities for the next 20 years (years 11 through 30). What is the constant annual payment you expect to receive at the beginning of each year if you assume an interest rate of 8 percent during the distribution period?
You deposit $13,000 annually into a life insurance fund for the next 10 years, after which time you plan to retire. a. If the deposits are made at the beginning of the year and earn an interest rate of 8 percent, what will be the amount in the retirement fund at the end of year 10? Future value= S b. Instead of a lump sum, you wish to receive annuities for the next 20 years (years 11 through 30). What is the constant annual payment you expect to receive at the beginning of each year if you assume an interest rate of 8 percent during the distribution period?
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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Transcribed Image Text:You deposit $13,000 annually into a life insurance fund for the next 10 years, after which time you plan to
retire.
a. If the deposits are made at the beginning of the year and earn an interest rate of 8 percent, what will be
the amount in the retirement fund at the end of year 10?
Future value= S
b. Instead of a lump sum, you wish to receive annuities for the next 20 years (years 11 through 30). What is
the constant annual payment you expect to receive at the beginning of each year if you assume an interest
rate of 8 percent during the distribution period?
Annual payment= S
c. Repeat parts (a) and (b) above assuming earning rates of 7 percent and 9 percent during the deposit
period and earning rates of 7 percent and 9 percent during the distribution period.
Deposit
Value at.
Distribution.
Annual.
Period
10 Years
Period
payment
7 percent
7 percent
9 percent
9 percent
7 percent
9 percent
%24
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