Today,you are purchasing a 20-year,6 percent annuity at a cost of $120,000.The annuity will pay annual payments starting 1 year from today.What is the amount of each payment?

Question

Quizplus · Accepted Answer

The annuity payment can be calculated using the formula for the present value of an annuity: $ PVA = PMT \times \left(\frac{1 - (1 + r)^{-n}}{r}\right) $. Solving for PMT gives the annual payment amount.

Today,you Are Purchasing a 20-Year,6 Percent Annuity at a Cost