tklopfstein
New member
- Joined
- Jul 16, 2005
- Messages
- 21
Hello Anybody, please:
Myself and four study partners tried to work on this problem with no luck. I called my professor and no luck getting a hold of him
Here is the problem:
The terms of a single parent's will indicate that a child will receive an ordinary annuity of $16000.00 per year from age 18 to age 24(so the child can attend college) and that the balance of the estate goes to a niece. If the parent dies on the child's 14th birthday, how much money must be removed from the estate to purchase the annuity? ( Assume an interest rate of 6% compounded annually)
The answer in the back of the book says: $74, 993.20
We had set the problem up as so: A(n,k)= R*(1-(1+i)^-n)*(1+i)^-k/i
16000*((1-(1+.06)^(-14)))*(1+.06)^(-8)/.06
this did not come out right, we also tried 6 and 14 and 18 and 6 and 13 and 6 and various other combinations and just could not get it come out right. Please help.
We have a test tomorrow.
Tammy Klopfstein
Myself and four study partners tried to work on this problem with no luck. I called my professor and no luck getting a hold of him
Here is the problem:
The terms of a single parent's will indicate that a child will receive an ordinary annuity of $16000.00 per year from age 18 to age 24(so the child can attend college) and that the balance of the estate goes to a niece. If the parent dies on the child's 14th birthday, how much money must be removed from the estate to purchase the annuity? ( Assume an interest rate of 6% compounded annually)
The answer in the back of the book says: $74, 993.20
We had set the problem up as so: A(n,k)= R*(1-(1+i)^-n)*(1+i)^-k/i
16000*((1-(1+.06)^(-14)))*(1+.06)^(-8)/.06
this did not come out right, we also tried 6 and 14 and 18 and 6 and 13 and 6 and various other combinations and just could not get it come out right. Please help.
We have a test tomorrow.
Tammy Klopfstein
