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4 March, 04:14

Morgan Jennings, a geography professor, invests $95,000 in a parcel of land that is expected to increase in value by 14 percent per year for the next eight years. He will take the proceeds and provide himself with a 20-year annuity. Assuming a 14 percent interest rate, how much will this annuity be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

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  1. 4 March, 07:03
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    The annuity will be $40916.60

    Explanation:

    Future value of land = Present value of land * (1 + rate) ^n

    Annuity = Future value of land*rate / (1 - 1 / (1 + rate) ^t)

    = $95,000*1.14^8*14% / (1 - 1/1.14^20)

    = $40916.55871562

    Therefore, The annuity will be $40916.60
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