You have a chance to buy an annuity that pays $24,000 at the beginning of each...

You have a chance to buy an annuity that pays $24,000 at the beginning of each year for 5 years. You could earn 4.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

Expert Solution

Ans $ 110100.62

P =	Periodic Payments
r =	rate of interest
n =	no of periods

Annuity PV Due (Beginning)=	P + ( P [ 1 - ( 1 + r )^-(n-1) ] / r )


	24000 + 24000 * ( 1 - ((1 / (1 + 4.5%)^(5-1))))/ (4.5%)


	110100.62

jeff jeffy answered 2 years ago

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