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21 October, 18:06

Your uncle is about to retire, and he wants to buy an annuity that will provide him with $75,000 of income a year for 20 years, with the first payment coming immediately at the beginning of the month. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today? Round to the nearest dollar.

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  1. 21 October, 19:51
    0
    It cost $915,166.69

    Explanation:

    R=75,000

    i=j/m, j=0.0525, m=1 - annually

    i=0.0525

    n=mt

    n=20

    An=R[1 - (1+i) ^-n] : i

    An = (75,000x[1 - (1+0.0525) ^-20]) : 0.0525

    An=$ 915,166.69
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