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Alexeev081 [22]
3 years ago
6

Sam was injured in an accident, and the insurance company has offered him the choice of $49,000 per year for 15 years, with the

first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity
Business
1 answer:
Eddi Din [679]3 years ago
4 0

Answer:

$464,968.53

Explanation:

Calculation to determine how large must the lump sum be to leave him as well off financially as with the annuity

Using Financial calculator to find the PRESENT VALUE (PV)

N 15 years

I/YR 7.5%

PMT $49,000 per year

FV $0

Hence;

PV= $464,968.53

Therefore how large must the lump sum be to leave him as well off financially as with the annuity is $464,968.53

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