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Annual Cash Value of Annuity Income

Forums › Ask CIMA Tutor Forums › Ask CIMA BA1 Tutor Forums › Annual Cash Value of Annuity Income

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by Ken Garrett.
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  • August 9, 2021 at 7:57 am #630872
    aaronlieu
    Participant
    • Topics: 9
    • Replies: 9
    • ☆

    Hi, I am looking for explanation for this question:

    An amount of $65,000 is invested today, providing an annuity income for the next ten years, starting in 1 year.

    If the interest rate is 7%, what, to the nearest $10, will be the annual cash value of the annuity income? (From the annuity table, the rate is 7.024%)

    The answer is $9,250.

    August 9, 2021 at 4:31 pm #630907
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10595
    • ☆☆☆☆☆

    If you had a mortgage of 65,000 and were paying 7% interest and repaying the loan, the equal annual amount you pay is:

    65,000 ÷ cumumalive 10 year 7% factor =65,000 ÷ 7.024 = 9250.

    Just turn it round and e tgemortgage provider receiving that amount each year.

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