Question

An ordinary annuity selling at $11,417.87 today promises to make equal payments at the end of each year for the next six years (N). If the annuity’s appropriate interest rate (I) remains at 9.50% during this time, the annual annuity payment (PMT) will be ________?

Answer 1

Annual payment $5,833,333.3

Step-by-step explanation:

he sooner the amount is received, the higher is the present value

Hence, annuity with greatest present value is:

An annuity that pays $1,000 at the beginning of each year

Value of annuity = Annual payment*Present value annuity factor

11,417.87 = Annual payment*PVAF(9.5%, 6 years)

11,417.87 = Annual Payment*4.4198

Annual payment = $2,583.35

Annual payment = 35,000,000/6 = $5,833,333.33