An insurance agent is trying to sell you an immediate- retirement annuity, which for a single amount paid today will provide you with $12,000 at the end of each year for the next 25 years. You currently earn 9% on low-risk investments comparable to the retirement annuity. Ignoring taxes, what is the most you would pay for this annuity?

Question

contestada

Respuesta :

DeniceSandidge DeniceSandidge · Answer 1 · 2020-02-06T10:54:48+01:00

Answer:

present value = 24790.35

Explanation:

given data

amount paid today = $12,000

time = 25 year

rate = 9 %

solution

we get here present value that is express as

present value = future value ÷ [tex](1+rate)^{time}[/tex] ............................1

here future value is = amount paid today × time period

Future value =$12,000 × 25 = $300000

so present value = [tex]\frac{300000}{(1+0.09)^{25}}[/tex]

present value = 24790.35

PiaDeveau PiaDeveau · Answer 2 · 2021-12-11T07:52:08+01:00

Present Value of annuity is $117,870.96 (Approx.)

Annual payment (P) = $12,000

Annual interest rate (r) = 9% = 0.09

Number of periods (n) = 25

Present Value of annuity

Present Value of annuity = P[{1 - (1 / (1 + r) n} / r]

Present Value of annuity = $12,000[{1 - (1 / (1 + 0.09)25} / 0.09]

Present Value of annuity = $12,000[{1 - (1 / 8.62308066)} / 0.09]

Present Value of annuity = $12,000[0.884032164 / 0.09]

Present Value of annuity = $12,000 x 9.822579605

Present Value of annuity = $117,870.96

https://brainly.com/question/13369387?referrer=searchResults