If Nicky could earn 9 percent on her money, what is the present value of annuity

Question

If Nicky could earn 9 percent on her money, what is the present value of annuity at purchased price $60,000.00 with $8,000.00 payments per years and 20 years duration?

(Related to Checkpoint 6.2) (Present value of an ordinary annuity) Nicki Johnson, a sophomore mechanical engineering student, receives a call from an insurance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her a fixed annual income. The annuities are as follows: Nicki could earn 9 percent on her money by placing it in a savings account. Alternatively, she could place it in any of the above annuities. Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 9 percent? If Nicki could earn 9 percent on her money, what is the present value of annuity A with $8,000 payments per year and 20 years duration? $n (Round to the nearest cent.)

Explanation / Answer

PRESENT VALUE = +8000/1.09 + 8000/1.09^2 + 8000/1.09^3......8000/1.09^20 =$13,028.37 =$73,028.37

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