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A couple of generations ago, a relative of Sophia wanted to share his wealth with family members and decided to open a special bank account. The purpose of such financial instrument was to pay out an annuity
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A couple of generations ago, a relative of Sophia wanted to share his wealth with family members and decided to open a special bank account. The purpose of such financial instrument was to pay out an annuity forever, which would be shared among all family members. Given that the initial deposit was 478,694 dollars and the prevailing interest rate at that time was 5 %, compounded annually, find the value of the annuity this family collects every year.

User Doydoy
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3 votes

Answer:

$23,934.70

Step-by-step explanation:

Perpetuity (P) Present Value = Deposit = $478,694

Perpetuity annuity value = Deposit * Interest rate

Perpetuity annuity value = $478,694 * 5%

Perpetuity annuity value = $23,934.70

User Danny Mencos
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