Suppose an annuity will pay $18,000 at the beginning of each year for the next 8 years. How much money is needed to start this annuity if it earns 6.9%, compounded annually?
2 answers
Do annuity payments stop at death? Or is lump sum payment made to a beneficiary? If either case, age and actuarial data on life expectancy are needed.
The present value of the annuity (due)
An=P*(1-v^n)/(1-v) where v=1/(1+i)
P=18000, n=8, i=0.069
A8=115346
An=P*(1-v^n)/(1-v) where v=1/(1+i)
P=18000, n=8, i=0.069
A8=115346
2 answers