Gary is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $31, 000 payment each year for the next 18 years. Factor Table Appendix 9.1 Present value of $1 received in n periods = 0.1799 Appendix 9.2 Present value of an annuity of $1 per period= 8.2014 Calculate how much Gary should be willing to pay for the annuity if he can invest his funds at 10% ( For calculation purposes, use 4 decimal places as displayed in the factor table provided and round the final answer to 0 decimal places, e.g. 58,971)
Gary is planning for his retirement this year. One option that has been presented to him is the purchase of an
Factor Table
Appendix 9.1 Present value of $1 received in n periods = 0.1799
Appendix 9.2 Present value of an annuity of $1 per period= 8.2014
Calculate how much Gary should be willing to pay for the annuity if he can invest his funds at 10% ( For calculation purposes, use 4 decimal places as displayed in the factor table provided and round the final answer to 0 decimal places, e.g. 58,971)
The investor will make the payment equivalent to the current worth of the annuity. It is because the an amount higher than the current worth is loss for the investor because investor can generate a similar annuity using market interest rate.
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