Second Best Insurance company is advertising a new product to retirees looking to invest their 401(K)...
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Second Best Insurance company is advertising a new product to retirees looking to invest their 401(K) retirement accumulations. The idea is this: give us, Second Best, the lump sum of $740 today and we'll then give you, the retiree, an annuity of $230 to be received at the end of each year, beginning one year from today, for 5 consecutive years. From the standpoint of the retiree, calculate the NPV of this product if the required rate of return is 4%. $ Place your answer in dollars and cents. Indicate any negative amounts (if applicable) with a minus sign in front of the number. Do not include a dollar sign in your answer. Work all calculations using at least 4 decimal places of accuracy. Second Best Insurance company is advertising a new product to retirees looking to invest their 401(K) retirement accumulations. The idea is this: give us, Second Best, the lump sum of $740 today and we'll then give you, the retiree, an annuity of $230 to be received at the end of each year, beginning one year from today, for 5 consecutive years. From the standpoint of the retiree, calculate the NPV of this product if the required rate of return is 4%. $ Place your answer in dollars and cents. Indicate any negative amounts (if applicable) with a minus sign in front of the number. Do not include a dollar sign in your answer. Work all calculations using at least 4 decimal places of accuracy.
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Answer rating: 100% (QA)
To calculate the Net Present Value NPV of the product we need to discount the future cash flows to t... View the full answer
Related Book For
Personal Financial Planning
ISBN: 9780357438480
15th Edition
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Posted Date:
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