Question

You bought an annuity selling at $14,427.59 today that promises to make equal payments at the beginning of each year for the next four years (N). If the annuity’s appropriate interest rate (I) remains at 5.00% during this time, then the value of the annual annuity payment (PMT) is .

Answer 1

PMT = $3875.00

Step-by-step explanation:

given data

annuity selling = $14,427.59

time = 4 year

interest rate = 5 %

solution

we get here annual annuity payment that is express as

PMT =
`(present\ value)/((1+r)*(1-(1+r)^(-n))/(r) )` ..................................1

put here valuer and we get

PMT =
`(14427.59)/((1+0.05)*(1-(1+0.05)^(-4))/(0.05) )`

solve it now and we get

PMT = $3875.00

so here value of the annual annuity payment (PMT) is $3875.00