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Free_Kalibri [48]
3 years ago
6

Your uncle is about to retire, and he wants to buy an annuity that will provide him with $75,000 of income a year for 20 years,

with the first payment coming immediately at the beginning of the month. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today? Round to the nearest dollar.
Business
1 answer:
kolezko [41]3 years ago
8 0

Answer:

It cost $915,166.69

Explanation:

R=75,000

i=j/m, j=0.0525, m=1 - annually

i=0.0525

n=mt

n=20

An=R[1-(1+i)^-n] : i

An=(75,000x[1-(1+0.0525)^-20]) : 0.0525

An=$ 915,166.69

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Explanation:

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