Question

You have a 20 year annuity with a present value of $575,000. If the apr is 6%, what is the monthly yield?.

Answer 1

Annuities allow us to measure the cost of making payments over a period of time. Given the entries in the question given, the monthly yield will be;

• $4119.48

Since the interest will be compounded monthly, the number of periods will be 12. To determine the monthly payment from a payout annuity, use the formula;

Present value = Monthly yield (1 - (1 + APR/12)^-12 × n

                                             APR/12

Fixing the above into the equation;

$575,000 = PMT (1 - (1 + 0.06/12)^-12 × 20

                              0.06/12

$575,000 = PMT 139.6

Making PMT the subject of the formula,

PMT = 575,000/139.6

PMT = $4118.911

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