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Annuities Practice Problems Prepared by Pamela Peterson Drake 0. 0. Congrats! You just won the $64 million Florida lottery. Now the Surely Company is offering you $30 million in exchange for the 20 installments on your winnings. If your chance cost of funds is 8%, should you agree to this deal? 0. ? accustomed: ?CF = $64,000,000 / 20 = $3,200,000?N = 20?i = 8%?Annuity due?PV = $33,931,517.44?No: the annuity is worth roughly $34 million to you, but Surely is offering exactly $30.? 0. Carol Calc plans on retiring on her 60th birthday. She wants to govern the same amount of funds aside each twelvemonth for the next twenty course of studys -- offset next socio-economic class -- so that she will be able to withdraw $50,000 per year for twenty years once she retires, with the first withdrawal on her 61st birthday. Carol is 20 years old today. How much must(prenominal) she set aside each year for her retirement if she provide earn 10% on her funds? 0. ?PV60 = $50,000 (PV annuity divisor for N=20, i=10%)?PV60 = $50,000 (8.5136)?PV60 = $425,678.19?Because she will stop make payments on her 40th birthday (first is on her 21st birthday, lead is on her 40th birthday), we must take the balance in the account on her 40th birthday:?PV40 = PV60 / (1 + 0.10)20 = $63,274.

35?Then, we need to calculate the deposits necessary to reach the goal:?FV40 = PV40 = $63,274.35?N = 20?i = 10%?FV = CF (FV annuity promoter for N=20, i=10%)?$63,274.35 = CF (FV annuity factor for N=20, i=10%)?$63,274.35 = CF (57.2750)?CF =payment = $1,104.75 per year? 0. engage I got a deal for you! If you lend me $100,000 today, I promise to pay you back in twenty- five annual installments of $5,000, starting five years from today (that is, my first payment to you is five years from today). You can earn 6% on your investments. leave alone you lend me the money? 0. ?This is a deferred annuity problem?CF = $5,000?N = 25?i = 6%?PV4 = $5,000 (PV annuity factor for N=25 and i=6%)?PV4 = $5,000 (12.7834)?PV4 = $63,916.78?PV0 =... If you want to cast down a full essay, order it on our website: Ordercustompaper.com

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