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    Annuity amount

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    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?

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    Solution Preview

    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 ...

    Solution Summary

    The solution explains how to calculate the annuity amount.