Ask Question
BusinessBusiness
31 May, 03:54

Assume that you are offered an annuity that pays $100 at the end of each year for 10 years. You could earn 8% on your money in other investments with equal risk. What is the most you should pay for the annuity

+1
Answers (1)
  1. 31 May, 04:02
    0
    The annuity is worth $671.01

    Explanation:

    Giving the following information:

    Cash flow = $100

    The number of years = 10 years.

    Interest rate = 8%

    To calculate the value of the annuity, we need to calculate the present value.

    First, we need to calculate the final value:

    FV = {A*[ (1+i) ^n-1]}/i

    A = annual cash

    FV = {100*[ (1.08^10) - 1]} / 0.08

    FV = $1,448.66

    Now, the present value:

    PV=FV / (1+i) ^n

    PV = 1,448.66 / (1.08^10)

    PV = $671.01
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Assume that you are offered an annuity that pays $100 at the end of each year for 10 years. You could earn 8% on your money in other ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Why can deadweight loss occur when a price is below the equilibrium even when some consumers benefit from it? Consumers will purchase more of the good at a price below equilibrium.
Answers (1)
Jana buys a dress for $25.98 and a blouse for $14.99. The total sales tax is $2.46. a. What is the total cost of her purchase? b.
Answers (1)
A reason that countries trade with each other is
Answers (1)
Agency relationships are normally consensual, coming about through voluntary consent and agreement between the parties. a. True b. False
Answers (1)
Snider Industries sells on terms of 2/10, net 45. Total sales for the year are $800,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases. Assume a 365-day year.
Answers (1)
New Questions in Business
In which year were tobacco commercials banned from network television in the united states?
No Answers
Maggie's manager notices that she exhibits an external locus of control when she speaks about her work. Her manager should Group of answer choices a. direct Maggie toward a job with more autonomy. b.
Answers (1)
Consider this argument: "The kidnappers have taken eight people hostage and are holding them at a farmhouse just outside town. If the SWAT team assaults the farmhouse, the hostages could be killed.
Answers (1)
Rent seeking is an attempt to A. use the government for individual benefit at the expense of others. Regulatory capture is an example of this, where a regulatory agency makes decisions benefiting the firm being regulated. B.
Answers (1)
An Insurance company is a business in which it pays to the company if there is a loss, damage, treatments or injury for the payment of premium amount. It calculates the risks that has occurred and pays to compensate the premium amount.
Answers (1)
Home » Business » Assume that you are offered an annuity that pays $100 at the end of each year for 10 years. You could earn 8% on your money in other investments with equal risk. What is the most you should pay for the annuity
Sign Up Forgot Password?