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s Respondus LockDown Browser Left 1:11:09 Tahzae Johnson: Attempt 1 Previous Page Next Page Page 4 of 20 Note: It is recommended that you save your response as you complete each question Question 4 (10 points) Peter Lynchpin wants to sell you an investment contract that pays equal $19,000 amounts at the end of each year for the next 30 years. If you require an effective annual return of 6 percent on this investment, how much will you pay for the contract today? $241,531.79 $261,531.79 51,531.79 5271,531.79 Previous Pae Next Pge Page 4 of 20 Save A Go to Submit

Explanation / Answer

Annual payment = $19,000

Number of annual payments = n = 30

Annual rate of return = r = 6% = 0.06

Present value of annuity = Annuity amount * {1-(1+r)-n}/r

Amount to be paid for contract = $19,000*(1-1.06-30)/0.06 = $261,531.79

Hence, correct answer is $261,531.79

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