4-9-36BP

Expert-verifiedFound in: Page 284

Book edition
16th

Author(s)
Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Pages
768 pages

ISBN
9781259277160

**Question: Morgan Jennings, a geography professor, invests $50,000 in a parcel of land that is expected to increase in value by 12 percent per year for the next five years. He will take the proceeds and provide himself with a 10-year annuity. Assuming a 12 percent interest rate, how much will this annuity be?**

**Answer**

The annuity will be $15,605.95.

Present value of land (PV) = $50,000

Periods (n) = 5

Incremental rate (i) = 12%

Present value (PV) = $88,117.08

Periods (n) = 10

Interest rate (i) = 12%

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