Calculate the annual cash flows

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Reference no: EM131576647

Calculate the following:

a. Calculate the annual cash flows from a $2.5 million, 20-year fixed-payment annuity earning a guaranteed return of 7 percent per year if payments are to begin at the end of the current year.

b. Calculate the annual cash flows from a $2.5 million, 20-year fixed-payment annuity earning a guaranteed return of 7 percent per year if payments are to begin at the end of year 6.

c. What is the amount of the annuity purchase required if you wish to receive a fixed payment of $240,000 for 20 years? Assume that the annuity will earn 7 percent per year.

Reference no: EM131576647

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