What would the required monthly payments have been

Assignment Help Financial Management
Reference no: EM132036937

Use the Annual Payout Annuity with COLA Formula to find the deposit necessary to receive monthly payouts with an annual cost-of-living adjustment. To use the formula, all figures must be annual figures, including the payout and the annual rate. You can adapt the formula for monthly payouts by using • the future value of a one-year ordinary annuity in place of the annual payout, where pymt is the monthly payout, and • the annual yield of the given compound interest rate in place of the annual rate r. Gary Kersting is about the retire, so he is setting up a payout annuity with his bank. He wishes to receive a monthly payout for the next twenty years, where the payout starts at $1,100 per month and receives an annual COLA of 4%. His money will earn 8.7% compounded monthly. (a) The annual payout is the future value of a one-year ordinary annuity. Find this future value. (Round your answer to the nearest cent.) $ (b) The annual rate r is the annual yield of 8.7% interest compounded monthly. Find this annual yield. (Round your answer to seven decimal places.) % (c) Use the Annual Payout Annuity with COLA Formula to find how much money he must deposit. (Round your answer to the nearest cent.) $ (d) Gary could have saved for his payout annuity with an ordinary annuity. If he had started doing so twenty-five years ago, what would the required monthly payments have been? (The two annuities pay the same interest rate. Round your answer to the nearest cent.) $

Reference no: EM132036937

Questions Cloud

What is the risk-adjusted npv of project : The Hokie Corporation is considering two mutually exclusive projects. What is the risk-adjusted NPV of project A?
Bonds make semiannual payments and currently sell : The bonds make semiannual payments and currently sell for 112.1 percent of par.
Planning for retirement : How much money must she deposit if her money earns 8% interest compounded monthly?
What is the company pretax cost of debt : What is the company’s pretax cost of debt?
What would the required monthly payments have been : If he had started doing so twenty-five years ago, what would the required monthly payments have been?
She will receive from her payout annuity : Compare it with the total amount that she will receive from her payout annuity.
By how much would the value of the company increase : By how much would the value of the company increase if it accepted the better project (plane)?
Which type of the truck should the firm purchase : Calculate the NPV for each type of truck. Which type of the truck should the firm purchase?
How large will wally first annual payout be : How large will Wally's first annual payout be? How large will Wally's second annual payout be?

Reviews

Write a Review

Financial Management Questions & Answers

  Ratios measures operating performance and source of cash

Which of the following is a source of cash? Information that can make a difference to the decision at hand is considered to be. Which of the following increases cash. Which of the following ratios measures operating performance?

  Accounts receivable transaction processing system

The finance department is evaluating two accounts receivable transaction processing system. Accuracy of weekly accounts receivable aging report.

  Which of the types of risk is diversifiable

Which of the following types of risk is diversifiable?

  What is the cash on cash rate of return for equity investors

what is the cash-on- cash rate of return (equity dividend rate) for the equity investors in this property?

  Problem 1budgets in managerial accountingsantiagos salsa is

problem 1budgets in managerial accountingsantiagos salsa is in the process of preparing a production cost budget for

  Suppose that the current spot interest rate for a term

The cash futures price of a 3-month zero coupon bond with a face value of $100 for delivery in 9.38 months from now is 96.31 dollars. Suppose that the current spot interest rate for a term of 12.38 months is 15.75 per cent per annum.

  What is the after-tax cash flow associated with this sale

Assume you bought an asset for $5,000. It was sold for $3,000 at the end of its second year of operation. If it is depreciated according to 3 year MACRS, what is the after-tax cash flow associated with this sale? Assume your tax rate is 20%.

  Decide not to participate in the rights offering

If you currently own 6,000 shares of stock in the company and decide not to participate in the rights offering, how much money can you get by selling your right

  Create a scholarship fund

Venus wants to create a scholarship fund that will make its first scholarship payment in 7 years from today.

  What is castle state bank net profit margin

Securities gains (losses if negative) 10.737, Taxes 41.997. What is Castle State Bank's net profit margin?

  What is the new overall required rate of return for firm

Initially firm x has a beta of 1.3, when Rrf=7% and Rm=12 percent. The firm now sells 10 percent of its assets (Beta=1.2) and uses the proceeds to purchase another asset, a machine with a beta of .8. What is the required rate of return on the machine..

  What is annual percentage rate on your account

Your credit card company charges you 1.18 percent per month. What is the annual percentage rate on your account?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd