An Annuity Paying $1400 at the End of Each Month

question 9

Essay

An annuity paying $1400 at the end of each month (except for a smaller final payment) was purchased with $225,000 that had accumulated in an RRSP. The annuity provides a semi-annually compounded rate of return of 5.2%.
a) What amount of principal will be included in Payment 137?
b) What will be the interest portion of Payment 204?
c) How much will the principal be reduced by Payments 145 to 156 inclusive?
d) How much interest will be paid in the twentieth year?
e) What will be the final payment?

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Definitions:

Palate

The roof of the mouth in humans and vertebrates, separating the oral cavity from the nasal cavity and consisting of the hard and soft palate.

Pharynx

A muscular tube that connects the mouth and nasal cavity to the esophagus and larynx, part of both the digestive and respiratory systems.

Chondroglossus

A muscle in the tongue that is responsible for tongue movements and shaping during speech and swallowing.

Levator Veli Palatine

The Levator Veli Palatini is a muscle in the soft palate that helps lift the soft palate during swallowing, preventing food from entering the nasal passages.