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11 June, 08:29

You have your choice of two investment accounts. Investment A is a 9-year annuity that features end-of-month $2,180 payments and has an interest rate of 8 percent compounded monthly. Investment B is an annually compounded lump-sum investment with an interest rate of 10 percent, also good for 9 years. How much money would you need to invest in B today for it to be worth as much as Investment A 9 years from now

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  1. 11 June, 08:53
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    Hence, $ 145548.77 should be invested in B today for it to be worth as much as investment A 9 years from now.

    Explanation:

    Future value of investment A

    =2180 * (((1 + (8%/12)) ^ (9*12) - 1) / (8%/12))

    =343196.39

    How much money would you need to invest in B today

    =343196.39 / (1+10%) ^9

    =145548.77
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