You inherit an annuity that will pay you $10,000 per year for 20 years, with the...

Question

Question

You inherit an annuity that will pay you $10,000 per year for 20 years, with the first payment being made today.

A fair return in the market approximates 8%.

How much should you ask for it if you decided to sell it?

a. $112,577.83

b. $106,035.99

c. $102,736.54

d. $114,769.58

e. $99,556.30

business finance

Answer 1

Answer #1

Present value of annuity due=(1+rate)*Annuity[1-(1+interest rate)^-time period]/rate

=1.08*10000[1-(1.08)^-20]/0.08

=$10000*10.6035992

=$106,035.99(Approx).

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Answer 2

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