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Annuity with annual payments

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1. Assume you are to receive a 10-year annuity with annual payments of $218. The first payment will be received today (that is, at t = 0) and the last payment will be received at the end of Year 9 (that is, at t = 9). You will invest each payment in an account that pays 8 percent. What will be the value in your account at the end of Year 20? (Round your answer to two decimal places and record without a dollar sign and without commas)

2. Your bank offers 3-year certificates of deposit with a stated rate of interest of 11.47% p.a., compounded quarterly. Your cousin (who works at Acme Bank and Trust, a competitor) wants to know what stated rate of interest you would require from them in order to switch your business to their bank. Acme's CD's are compounded on a monthly basis. What is the minimum stated interest rate you should ask for from Acme in order to make you indifferent to switching?

Reference no: EM131444190

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