How much would you be willing to pay for a 10-year ordinary annuity if the payments...

How much would you be willing to pay for a 10-year ordinary annuity if the payments are $500 per year and the interest rate is 6.25% compounded annually ?

Expert Solution

SOLUTION :

given data

payments = $500 / year

interest rate = 6.25%

by using annuity table

we have 7.36 for 6 % at 10 years

and 7.02 for 7%

then by interpolating the two values we have 6.25% = 7.275

= 500 * 7.275

= 3637.5

annuity table :

for your understanding i have uploded the annuity table

if u have any doubts plz comment . if u like the answer plz give a thumb up ..thanq...

keosha answered 6 months ago

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