View the step-by-step solution to:

Question

Tomorrow, on your 25th birthday, you will receive the proceeds of a trust fund that was set up by your wealthy

grandmother. She invested $10,000 at 5 percent on your 5th birthday. You plan to invest your inheritance with an insurance company at a guaranteed rate of 8 1/2 percent. When you retire at the age of 65, you will begin to draw your investment in 20 equal installments calculated to reduce your fund to $0. You will make each withdrawal at the end of the year, and that the money that remains invested will continue to earn 8 1/2 percent.

If inflation remains at a steady 6%, what will the amount of the first annuity payment be worth in today's dollars? That is: the first payment occurs at age 66. What is this payment worth in today's dollars if inflation is 6%? (round to 2 decimal places)

Top Answer

Value of the first... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question