American General offers a 8 -year annuity with a guaranteed rate of 6.73% compounded annually. How...

American General offers a 8 -year annuity with a guaranteed rate of 6.73% compounded annually. How much should you pay for one of these annuities if you want to receive payments of $600 annually over the 8 year period?

Expert Solution

A = P(1 + r)^t

or, 600 = P(1 + 0.0673)⁸

or, 600 = P(1.0673)⁸

or, P = 600/(1.0673)⁸

or, P = 356.34

milcah answered 2 years ago

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