A new investment opportunity for you is an annuity that pays $2,750 at the beginning of...

A new investment opportunity for you is an annuity that pays $2,750 at the beginning 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?

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Expert Solution

Amount to be paid for the annuity is given as=Present Value of Annuity due=Annuity/rate*(1-1/(1+rate)^n)*(1+rate)=2750/5.5%*(1-1/(1+5.5%)^3)*(1+5.5%)=7827.37921430

jeff jeffy answered 2 years ago

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