Title: Silva is contemplating to buy a 20 year annuity paying $2500 at the end of each month. What amount ... Post by: Hillier on Nov 27, 2017 Silva is contemplating to buy a 20 year annuity paying $2500 at the end of each month. What amount will be required to purchase the annuity, if the annuity provides a return of 6.75% compounded annually?
A) $334 000 B) $47 246 C) $600 000 D) $37 037 E) $567 436 Title: Re: Silva is contemplating to buy a 20 year annuity paying $2500 at the end of each month. What ... Post by: Axy on Nov 27, 2017 Content hidden
Title: Re: Silva is contemplating to buy a 20 year annuity paying $2500 at the end of each month. What amount ... Post by: Hillier on May 14, 2018 Correct, thank you
Title: Re: Silva is contemplating to buy a 20 year annuity paying $2500 at the end of each month. What ... Post by: lizblackwelder on Dec 20, 2021 Given about an annuity,
Monthly payment PMT = $2500 term period t = 20 years interest rate EAR = 6.75% compounded annually First we need to calculated monthly rate. So, Monthly rate r = ((1+EAR)^(1/12)) - 1 = ((1.0675^(1/12)) - 1) = 0.5458% So, price of the annuity is calculated using PV formula of ordinary annuity PV = PMT*(1 - (1+r)^(-n*t))/r where r = 12 months in a year So, price of the annuity = 2500*(1 - (1 + 0.005458)^(-12*20))/0.005458 = $333998.96 |