if your total assets equal $50,000 and your total liabilities equal $15,000; your debt ratio is 233% 30%…

if your total assets equal $50,000 and your total liabilities equal $15,000; your debt ratio is 233% 30% 143% 70% 333% question 14 3 pts your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years. if you require a 7% return, what is the most you should pay for this investment? $175,590 $49,179 $250,000 $225,682 $201,000

if your total assets equal $50,000 and your total liabilities equal $15,000; your debt ratio is 233% 30% 143% 70% 333% question 14 3 pts your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years. if you require a 7% return, what is the most you should pay for this investment? $175,590 $49,179 $250,000 $225,682 $201,000

Answer

Explanation:

Step1: Recall debt - ratio formula

The debt - ratio formula is $\text{Debt Ratio}=\frac{\text{Total Liabilities}}{\text{Total Assets}}\times100%$.

Step2: Substitute values

Given total assets = $$50000$ and total liabilities = $$15000$. Substitute into the formula: $\frac{15000}{50000}\times 100%$.

Step3: Calculate

$\frac{15000}{50000}\times 100% = 0.3\times100%=30%$.

Step4: Recall present - value of an ordinary annuity formula

The present - value of an ordinary annuity formula is $PV = A\times\frac{1-(1 + r)^{-n}}{r}$, where $A$ is the annual payment, $r$ is the interest rate per period, and $n$ is the number of periods.

Step5: Identify values

Here, $A = 25000$, $r=0.07$, and $n = 10$.

Step6: Calculate

First, calculate $(1 + 0.07)^{-10}=1/1.07^{10}\approx0.508349$. Then $1-(1 + 0.07)^{-10}=1 - 0.508349 = 0.491651$. $\frac{1-(1 + 0.07)^{-10}}{0.07}=\frac{0.491651}{0.07}\approx7.02358$. $PV=25000\times7.02358 = 175589.5\approx175590$.

Answer:

First question: B. 30% Second question: A. $$175,590$