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You own an annuity due contract that will pay you $3,000 per year for 12 years. You need money to ...

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You own an annuity due contract that will pay you $3,000 per year for 12 years. You need money to ...

You own an annuity due contract that will pay you $3,000 per year for 12 years. You need money to pay back a loan in 5 years, and you are afraid if you get the annuity payments annually you will spend the money and not be able to pay back your loan. You decide to sell your annuity for a lump sum of cash to be paid to you five years from today. If the interest rate is 8%, what is the equivalent value of your 12-year annuity if paid in one lump sum five years from today?
A) $22,008
B) $18,000
C) $35,876
D) $38,880

Textbook

Foundations of Finance

Edition: 9^th

Authors: Keown, Petty, Martin

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