Business College

An insurance settlement of $2.5 million must replace Trixie Eden's income for the next 45 years. What income will this settlement provide at the end of each month if it is invested in an annuity that earns 7.5%, compounded monthly

Answers

Answer 1

Answer:

$16,184.66

Explanation:

The computation of the income that needed at the end of the each month is shown below:

Here we use the PMT function

Given that

Present value = $2,500,000

NPER = 45 × 12 = 540

RATE = 7.5% ÷ 12 = 0.625

FV = $0

The formula is shown below:

= PMT(RATE;NPER;-PV;FV;TYPE)

After applying the above formula

The present value comes in negative

The monthly payment is $16,184.66

An Insurance Settlement Of $2.5 Million Must Replace Trixie Eden's Income For The Next 45 Years. What

Related Questions

Consumption spending is:__________ A. spending by households, businesses, and government on all goods used up within one year. B. spending by individuals and households on both durable and nondurable goods. C. spending on goods and services by heads of households. D. spending by individuals and households on only nondurable goods, since they are used up quickly.

Answers

Answer:

b. spending by individuals and households on only non-durable goods.

Explanation:

Consumption spending is spending by individuals and households on only non-durable goods. Consumption is a component of GDP which includes spending on goods and services by individuals and households as it includes non-durable as well as durable goods on the basis of consumption patterns.

Consider the following cash flows: Year Cash Flow 0 –$ 33,000 1 13,400 2 18,300 3 10,800 What is the IRR of the cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answers

Answer:

14.23%

Explanation:

Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested

IRR can be calculated with a financial calculator

Cash flow in year 0 = –$ 33,000

Cash flow in year 1 = 13,400

Cash flow in year 2 = 18,300

Cash flow in year 3 = 10,800

IRR = 14.23%

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

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