Question

You bought an annuity selling at $14,427.59 today that promises to make equal payments at the beginning of each year for the next four years (N). If the annuity’s appropriate interest rate (I) remains at 5.00% during this time, then the value of the annual annuity payment (PMT) is .

Answer 1

Answer:

PMT  =  $3875.00

Explanation:

given data

annuity selling = $14,427.59

time = 4 year

interest rate = 5 %

solution

we get here annual annuity payment that is express as

PMT = $\frac{present\ value}{(1+r)*\frac{1-(1+r)^{-n}}{r} }$      ..................................1

put here valuer and we get

PMT  = $\frac{14427.59}{(1+0.05)*\frac{1-(1+0.05)^{-4}}{0.05} }$  

solve it now and we get

PMT  =  $3875.00

so here value of the annual annuity payment (PMT) is $3875.00