Morgan Jennings, a geography professor, invests $50,000 in a parcel of land that is expected to increase in value by 12% per year for the next five years. He will take the proceeds and provide himself with a 10 year annuity. Assuming a 12% interest rate, how much will this annuity be?© BrainMass Inc. brainmass.com June 4, 2020, 12:49 am ad1c9bdddf
We first find the future value of the land price.
FV in 5 years = PV (1+rate)^n = 50,000 (1+12%)^5 = 88,117.08
This is the ...
The solution explains how to calculate the annuity amount.