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Jessica Thomas expects to receive $13500 per year based on her decreased husband's contributions to a social security. Assume that she receives payments for 9 years and a rate of 6% per year and find the present value of this annuity

User Ashok Koyi
by
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1 Answer

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The present value of an annuity is :


P=PMT*(1-(1)/((1+r)^n))/(r)

where :

P = Present Value

PMT = Periodic payments

r = interest rate

n = number of periodic payments

From the problem, we have :

PMT = $13,500

r = 6% or 0.06

n = 9 years = 9 periodic payments

The present value is :


\begin{gathered} P=13500*(1-(1)/((1+0.06)^9))/(0.06) \\ P=91822.846 \end{gathered}

The answer is $91,822.85

User Fallout
by
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