In: Finance
An insurance company pays 5% per annum on money left with it. What would be the cost of an annuity certain paying $250 at the end of each month for 10 years?
Cost of an annuity | P×[1-(1÷(1+r)^n)]÷r | |
Here, | ||
A | Interest rate per annum | 5.00% |
B | Number of years | 10 |
C | Number of compoundings per per annum | 12 |
A÷C | Interest rate per period ( r) | 0.42% |
B×C | Number of periods (n) | 120 |
Payment per period (P) | $ 250 | |
Cost of an annuity | $ 23,570.34 | |
250×(1-(1÷(1+0.42%)^120))÷0.42% |