3-82 You start an annuity with $1million and expect to receive 12 equal payments beginning at the end of the first year.The guaranteed annual interest rate is 6 percent.The annual payments that you expect to collect are

Question

Quizplus · Accepted Answer

The present value of the annuity can be calculated as follows:

PV = A * (1 - (1+i)^-n)/i

where PV is the present value, A is the annual payment, i is the interest rate, and n is the number of payments.

In this case, PV = $1,000,000, i = 6%, and n = 12.

Substituting the values, we get:

$1,000,000 = A * (1 - (1+0.06)^-12)/0.06

Solving for A, we get:

A = $119,277.03

Therefore, the annual payments that you expect to collect are $119,277.03. Choice B is the correct answer.

3-82 You Start an Annuity with $1million and Expect to Receive