Question11 Given $\$ 250,000$ today, determine the equivalent series of 10 annual payments which could be generated beginning in 1 year. Assume interest is 12 percent compounded annually.

Studdy Solution
Solve for the annual payment $P$.
First, calculate $(1 + 0.12)^{-10}$:
$$(1.12)^{-10} \approx 0.3220$$
Next, calculate the annuity factor:
$$\frac{1 - 0.3220}{0.12} \approx \frac{0.6780}{0.12} \approx 5.6500$$
Now, solve for $P$:
$$250,000 = P \times 5.6500$$
$$P = \frac{250,000}{5.6500}$$
$$P \approx 44,247.79$$
The equivalent series of 10 annual payments is approximately:
$\boxed{44,247.79}$