For tax reasons, your client wishes to purchase an annuity that pays $60,000 each year for 11 years, with the first payment in o

Question

2 years ago

10

For tax reasons, your client wishes to purchase an annuity that pays $60,000 each year for 11 years, with the first payment in o

ne year. At an interest rate of 12% and focusing on time value of money without consideration of any fees, how much would the client need to invest now?
Equivalent problem structure (in neutral time-value-of-money terms): What is the present value of an annuity that pays $60,000 each year for 11 years, assuming a discount rate of 12% and the first payment occurs one year from now? Equivalent problem structure (as a borrower): How much could you borrow today in exchange for paying back $60,000 each year for 11 years, assuming an interest rate of 12% and the first payment occurs one year from now?

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