3.
value:
10.00 points
You deposit $14,000 annually into a life insurance fund for the next 10 years, after which time you plan to
retire.
a. If the deposits are made at the beginning of the year and earn an interest rate of 7 percent, what will be
the amount in the retirement fund at the end of year 10? (Do not round intermediate
calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Future value
$
b. Instead of a lump sum, you wish to receive annuities for the next 20 years (years 11 through 30). What
is the constant annual payment you expect to receive at the beginning of each year if you assume an
interest rate of 7 percent during the distribution period? (Do not round intermediate
calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Annual payment
$
c. Repeat parts (a) and (b) above assuming earning rates of 6 percent and 8 percent during the deposit
period and earning rates of 6 percent and 8 percent during the distribution period. (Do not round
intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))
Deposit
Period
Value at
10 Years
Distribution
Period
Annual
payment
6 percent
$
6 percent
$
8 percent
$
8 percent
$
8 percent
$
6 percent
$
8 percent
$
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Difficulty: Medium