Question

You have a chance to buy an annuity that pays $13,700 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity

Answer 1

$36,961.69

Step-by-step explanation:

For computing the amount pay for the annuity we use the present value formula which is to be shown in the attachment below:

Given that,

Future value = 0

Rate of interest = 5.5%

NPER = 3 years

PMT = $13,700

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after applying the above formula, the amount paid for the annuity i.e present value is $36,961.69