You are planning and saving for your retirement. You want to have a 10-year annuity of...

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You are planning and saving for your retirement. You want to have a 10-year annuity of $50,000 per year with the first payment 20 years from today when you retire. You want a 5-year annuity of $75,000 per year that has its first payment 1 year after you get the last payment from the first annuity. To pay for this, you will pay $20,000 per year for 3 years with the first payment 4 years from today and an 8-year annuity of A per year with the first payment 9 years from today. If the interest rate is 7%, what is the value of A? Draw the time line, and solve by setting PVget equal to PVgiveup. You are planning and saving for your retirement. You want to have a 10-year annuity of $50,000 per year with the first payment 20 years from today when you retire. You want a 5-year annuity of $75,000 per year that has its first payment 1 year after you get the last payment from the first annuity. To pay for this, you will pay $20,000 per year for 3 years with the first payment 4 years from today and an 8-year annuity of A per year with the first payment 9 years from today. If the interest rate is 7%, what is the value of A? Draw the time line, and solve by setting PVget equal to PVgiveup.

Answer rating: 100% (QA)

Solution To solve this problem we can set up a timeline to help visualize the cash flows 0 4 8 11 20 ... View the full answer