Return on the annuity, Finance Basics

Assignment Help:

An insurance company offers you and end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9%. What is the most you would be willing to pay today for this annuity? 

a

Amount offered every year by

   
 

insurance company

   

 mce_markernbsp;                     48,000.00

b

Period (Years)

   

20

c

Interest rate claimed

 

9%

d

Present Value of the annuity

   
 

of 20 years

   

$438,170.19

           
 

Note: Assumed amount received at the end of the year.


 


Related Discussions:- Return on the annuity

Working capital cycle, Working Capital Cycle The Concept of Working C...

Working Capital Cycle The Concept of Working Capital/Cash Operating Cycle Working capital cycle refers to period such elapses between the payment for raw materials bought

Risk-free interest rate-corporate tax rate, XYZ is considering a capital re...

XYZ is considering a capital restructuring to allow $300 million in debt. Currently, XYZ is an all-equity firm with earnings before interest and taxes of $260 million. Assume unlev

Overdraft finance, Overdraft Finance This finance is perfect to need a...

Overdraft Finance This finance is perfect to need as bridging finance in sense such should be required to solve the company's short term liquidity problems in specific those o

Unadjusted, $1,000 of insurance had not been used up by January 31. $325 of...

$1,000 of insurance had not been used up by January 31. $325 of insurance had been used up in January

Ros - return on sales-profit margin , ROS - Return on Sales (Profit Margin)...

ROS - Return on Sales (Profit Margin) The Average of the industry ROS was 5.18% for 2004, 4.41% for 2005, and 7.20% for 2006. The chart showed that ROS has been declined f

Important points for shareholders and creditors, Important Points for Share...

Important Points for Shareholders and Creditors 1. In raising capital, the borrowing firm will constantly question the financial securities in form of preference shares

What is expected return, 1. Using the variance-covariance matrix (∑) and th...

1. Using the variance-covariance matrix (∑) and the expected return vector (er) given in the appendix, calculate the set of weights that correspond to the portfolio that maximizes

Calculate the percentage of equity of firm sells, Consider an economy with ...

Consider an economy with three dates {t=0, 1, 2}. A firm has assets in place that generate an output (profit) of either 40 in state L or 160 in state H at t=2. Bothe states equally

Describe the transaction structure-financing, Description of the deal, anal...

Description of the deal, analysis of abnormal returns & premium (a)  Describe the transaction structure, mode of payment, and financing.  (b) Give your comment/assessment of

#toption, expression of underlying asset''s price at maturity T for lookbac...

expression of underlying asset''s price at maturity T for lookback option.

Write Your Message!

Captcha
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