Question
In: Finance
a 10-year annuity is to make an annual payment of $2,500. Its price must be less...
a 10-year annuity is to make an annual payment of $2,500. Its price must be less than $25,000
True or False?
Solutions
Expert Solution
True. The price
must be less than 25000.
The Price 25000 is only possible when interest rate is 0,but based
on tine value of money the interest rate is always greater than 0.
Higher the discount rate lower will be the PV of annuity as per the
formula
PV =PMT*((1-(1+r)^-n)/r)
jeff jeffy answered 2 years agoRelated Solutions
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