An insurance company pays 5% per annum on money left with it. What would be the...

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?

Expert Solution

	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%

jeff jeffy answered 2 years ago

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