Ordinary Annuities, Present and Future Values
Not what you're looking for?
A. Joe won a lottery jackpot that will pay him $12,000 each year for the next ten years. If the market interest rates are currently 12%, how much does the lottery have to invest today to pay out this prize to Joe over the next ten years?
B. Mary just deposited $33,000 in an account paying 10% interest. She plans to leave the money in this account for seven years. How much will she have in the account at the end of the seventh year?
C. Mary and Joe would like to save up $10,000 by the end of three years from now to buy new furniture for their home. They currently have $2500 in a savings account set aside for the furniture. They would like to make equal year end deposits to this savings account to pay for the furniture when they purchase it three years from now. Assuming that this account pays 8% interest, how much should the year end payments be?
Purchase this Solution
Solution Summary
There are three problems. Solution describes the use of ordinary annuities, future value and present value concepts in daily life problems.
Solution Preview
Please refer attached document for complete solution. Work done with the help of equation writer may not print here.
Solution
1) Joe won a lottery jackpot that will pay him $12,000 each year for the next ten years. If the market interest rates are currently 12%, how much does the lottery have to invest today to pay out this prize to Joe over the next ten years?
Solution:
The deposit amount should be equal to present value of ten annuity payments of $12000 per year at 12%. We assume year end payments.
Present Value P, of an ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Operations Management
This quiz tests a student's knowledge about Operations Management
Basics of corporate finance
These questions will test you on your knowledge of finance.