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Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $95,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7.25%. How much would it cost her to buy such an annuity today?

Respuesta :

thaovtp1407

Answer:

$1,149,847.955

Explanation:

Given:

  • n = 30 years
  • Annuity(C) :  $95,000 per year
  • Rate (r) : 7.25% = 0.0725

The formula we need to use to find the cost your aunt needs to pay is:

PV = [tex]C * (1-(1+i)^{-t} )/i[/tex]

= [tex]95,000 * (1-(1+0.0725)^{-30} )/0.0725[/tex]

= $1,149,847.955

Hope it will find you well.

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