Question

Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $95,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7.25%. How much would it cost her to buy such an annuity today?

Answer 1

$1,149,847.955

Step-by-step explanation:

Given:

• n = 30 years
• Annuity(C) : $95,000 per year
• Rate (r) : 7.25% = 0.0725

The formula we need to use to find the cost your aunt needs to pay is:

PV =
`C * (1-(1+i)^(-t) )/i`

=
`95,000 * (1-(1+0.0725)^(-30) )/0.0725`

= $1,149,847.955

Hope it will find you well.