Charlie wants to retire in 15 years,and he wants to have an annuity of $50,000 a year for 20 years after retirement.Charlie wants to receive the first annuity payment the day he retires.Using an interest rate of 8%,how much must Charlie invest today in order to have his retirement annuity (round to nearest $10).
A)$167,130
B)$200,450
C)$256,890
D)$315,240

Question

Quizplus · Accepted Answer

The correct answer is A because the present value of an annuity is calculated using the formula PV = PMT * [1 - (1 + r)^-n] / r, where PMT is the annuity payment, r is the interest rate, and n is the number of periods. In this case, PMT = $50,000, r = 8%, and n = 20. Plugging these values into the formula, we get PV = $50,000 * [1 - (1 + 0.08)^-20] / 0.08 = $167,130.

Charlie Wants to Retire in 15 Years,and He Wants to Have