37.1k views
0 votes
Baxter desires to purchase an annuity on January 1, 2019, that yields him five annual cash flows of $19,000 each, with the first cash flow to be received on January 1, 2022. The interest rate is 10% compounded annually. The cost (present value) of the annuity on January 1, 2019, is ________. (Use spreadsheet software or a financial calculator to calculate your answer.

User MacMark
by
6.6k points

1 Answer

4 votes

Answer:

$72,025

Step-by-step explanation:

P=R (1-(1+i)^-n)/i

P=$19,000(1-(1+.1)^-5/.1

P=$72,025

User Aaron Bruce
by
7.1k points