Exercise D9-4 Parker is planning for his retirement this year. One option that h

Question

Exercise D9-4 Parker is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $60,000 payment each year for the next 15 years. Click here to view the factor table Calculate how much Parker should be willing to pay for the annuity if he can invest his funds at 9%. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Annuity Payment s

Explanation / Answer

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

=$60000[1-(1.09)^-15]/0.09

=$60000*8.0607

which is equal to

=$483642(Approx).

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