2. You have a 20-year annuity with a present value of $575,000. If the APR is...

You have a 20-year annuity with a present value of $575,000. If the APR is 6%, what is
the monthly yield?

Select one:

a. None of these

b. $3761.26

c. $4439.18

d. $4119.48

e. $4325.67

Solutions

Expert Solution

Data given:

Time period (in years), t = 20 years

Number of periods, n = 12 x 20 = 240

Present value of annuity, P = $575000

Rate of interest or APR, R = 6%

Rate of interest per period, r = (R/12)% = (6/12)% = 0.5%

Amount of each monthly yield, M = ?

As we know, the formula for computing the present value of an ordinary annuity is given as -

where P - present value of annuity

M - amount of each annuity payment

r - rate of interest per period

n - number of payments or periods made in the duration

Using the above formula, we can calculate the monthly yield for the given annuity as -

Thus, the amount of monthly yield for the given annuity is approximately $4119.48 .

Hence, the correct option is (D) .

orchestra answered 1 year ago

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