If you put up $30,000 today in exchange for a 8.4 percent, 9-year annuity, what will the annual cash

If you put up $30,000 today in exchange for a 8.4 percent, 9-year annuity, what will the annual cash flow be? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Annuity cash flow

$

rev: 04-30-2011

Explanation:

Here we have the PVA, the length of the annuity, and the interest rate. We want to calculate the annuity payment. Using the PVA equation:

PVA = C({1 – [1/(1 + r)t]} / r )

$30,000 = C{[1 – (1/1.084)9 ] / 0.084}

We can now solve this equation for the annuity payment. Doing so, we get:

C = $30,000 / 6.14430

C = $4,882.57

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

9

8.4%

±$30,000

N

I/Y

PV

PMT

FV

Solve for

$4,882.57