If you put up $47,000 today in exchange for a 6.75 percent, 14-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

If you put up $47,000 today in exchange for a 6.75 percent, 14-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Annual cash flow

$

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)

PVA = $47,000 = $C{[1 − (1/1.067514)] / 0.0675}

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

C = $47,000 / 8.878105 = $5,293.92

   

Calculator Solution:

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

   

Enter

14

6.75%

$47,000

N

I/Y

PV

PMT

FV

Solve for

$5,293.92