Ask Question
5 July, 10:22

Geraldine was injured in a car accident, and the insurance company has offered her the choice of $25,000 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 her as well off financially as with the annuity

+3
Answers (1)
  1. 5 July, 13:26
    0
    Present value of annuity due = (1+interest rate) * Annuity[1 - (1+interest rate) ^ - time period]/rate

    = (1+0.075) * 25000*[1 - (1.075) ^-15]/0.075

    =$25000*9.489153726

    =$237,228.84
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Geraldine was injured in a car accident, and the insurance company has offered her the choice of $25,000 per year for 15 years, with the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers