Calculate the Annual Cash Flows of a $2 Million, 10-Year

question 74

Multiple Choice

Calculate the annual cash flows of a $2 million, 10-year fixed-payment annuity earning a guaranteed 8 percent annually if the payments are to start at the end of this year.

• A)$137,990.27.
• B)$275,980.53.
• C)$298,058.98.
• D)$149,029.49.
• E)$220,000.00.

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Definitions:

Issue Value

The price at which a new issue of securities is offered for sale to the public or the nominal value of a security at the time of its issuance.

Zero

A numerical value representing nothing or the absence of any quantity.

American Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a specified asset at a certain price before the option expires.

Asset Price

The value at which an asset is bought or sold on the market.