Please do not use Excel to answer this question; I am not learning how to solve
ID: 2383337 • Letter: P
Question
Please do not use Excel to answer this question; I am not learning how to solve by using Excel.
Please state all formulas and please be clear when explaing the question. Write out what variables are being used and what they represent.
Thank you in advance.
Lloyd Blankfein would like to supplement his low pension paid by his employer Goldman Sacks. His personal banker Jamie Dimon told him that he could pay $1,000 every month for ten years (making 10 × 12 = 120 payments at the end of each month until her retirement) and then he will start receiving $1,000 forever. He will receive the first $1,000 in ten years and one month, i.e. one month after he made his last payment; after he passes away his heirs (and their heirs etc.) will continue to receive the monthly
payments forever. What is the effective annual rate (EAR) the bank used to calculate the terms of this deal?
Explanation / Answer
Paymrnts = 1000 per month = 12000 per year = 120000 Total Amount Received = $ 1000 EAR = 1000/120000*100 = .83%