Question

Question 8 1 pts You buy an ordinary annuity today for $127.791, which promises to pay you $13,753 per year. If the interest rate is 7.25 percent, for how many years will you receive payments? Answer to 4 decimals. 15.9991

Answer 1

Given.

PV of ordinary annuity = $ 127791

Annuity (A) = $ 13753

Interest rate (r) = 7.25% or 0.0725

Years = n

Solution :-

PV of ordinary Annuity 122091 - 12.2015 - 0700725 112779) x 0.0725 - 1 . 13753 (1.0725n 0.67366 = 1 - 710225)n 0.67366 + 1 06 (1.0725h = 11.0725)n = 1 – 0.67366 (1.0725)n = 0.32634 2624 = (1.0725)

3,06428878 = (1.0725) Taking "Log" both sides, Log(3,06478878) = Log(1.0725) Log (3.06428878) = n(log (1.0728)] 0.486329691 = n(0.0303973) 0.486329691 an 0.0303973 15.9991 = n
Thus, you will receive payments in 15.9991 years.