Use the following information in solving the following question(s).
You are going to pay $100 into an account at the beginning of each of the next 40 years.At the beginning of the 41st year,you buy a 30-year annuity whose first payment comes at the end of the 41st year (the account pays 12%).
-How much will you receive at the end of the 41st year (i.e. ,the first annuity payment)? Round to the nearest $100.
A)$93,000
B)$7,800
C)$11,400
D)$10,700

Question

Quizplus · Accepted Answer

The future value of the 40 deposits is $100*(1.12^40-1)/0.12=$100*114,000=$11,400,000. The present value of the annuity is $100*(1-1/(1.12^30))/0.12=$100*11,400=$1,140,000. The first annuity payment is $1,140,000*0.12=$136,800. The account balance at the end of the 40th year is $11,400,000-$136,800=$11,263,200. The first annuity payment is $11,263,200*0.12=$1,351,584.

Use the Following Information in Solving the Following Question(s)