You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year at...

You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year at the Beginning of each year. The rate of return is 4.5 percent. How many years of annuity payments will you receive?

A. 24.96 years

B. 29.48 years

C. 28.73 years

D. 33.08 years

E. 38.00 years

Solutions

Expert Solution

Compute the number of an annuity payment, using the equation as shown below:

Rearrange the above-mentioned equation to determine the number of annuity payment as follows:

Take log both the side to calculate the number of periods as follows:

Hence, the number of the period is 28.73 years.

jeff jeffy answered 1 year ago

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