Question

Asked Sep 22, 2019

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Your uncle is about to retire, and he wants to buy an annuity that will provide him with $5,300 of income a year for 30 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?

Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.

Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.

A. $85,028.03

B. $83,360.81

C. $96,698.54

D. $95,031.33

E. $70,856.69

Step 1

The today’s cost can be calculated using the PV function of excel. Inputs of the PV function will be:

Period = 30 years

PMT = Payment per period = Income = -5300

Rate = 0.0525

FV = Future value = 0

Step 2

PV is calculated ...

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