Question

Mark Ventura has just purchased an annuity to begin payment two years from today. The annuity is for $20,000 per year and is designed to last 8 years. If the interest rate for this problem calculation is 11 percent, what is the most he should have paid for the annuity? Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Answer 1

PV of $20,000 payments after 1 year Here 1Interest rate per annum 2 Number of vears 3 Number of compoundings per per annum 11.00% 4 6 4 1+3 Interest rate per period (r 11.00% 7 5 2x3 Number of periods (n) Payment per period (P 20,000 10 PV of $20,000 payments after 1 year 102,922.46 20000*[1-(1/(1+11%) ^81/11% 12 13 14 15 16 17 18 19 4 1+3 rate per period (r 20 5 2x3 Number of periods (n 21 Amount should pay for annui Here 1rate per annum 2 Number of vears 3 Number of compoundings per per annum 11% 11% Future value (FV 102,922 Amount should pay for annuity $ 23 24 92,722.93 102922.46*(1/(1+11%/1