84.8k views
14 votes
Calculate price of a 25-year annuity making a $60 annual payment, discounted at 5%.

User Omer Eldan
by
5.1k points

1 Answer

8 votes

Answer:

the price of a 25-year annuity is $845.64

Step-by-step explanation:

The computation of the price is as follows:

The price of a 25-year annuity is

= Annual payment × ((1 - (1 + discounted rate)^(number of years)) ÷ discounted rate)

= $60 × ((1 - (1 + 5%)^(-25)) ÷ 5%)

= $845.64

hence, the price of a 25-year annuity is $845.64

Therefore it could be determined by applying the above formula so that the price could come

User Cristhian
by
5.3k points