Basim purchased a deferred annuity from an insurance company for $10 971. The money used to purchase the annuity will earn 6% quarterly. The annuity will provide 16 quarterly payments of $1000. If the first payment is to be received on October 1, 2017, when did Basim purchase the deferred annuity?

Question

Quizplus · Accepted Answer

The annuity earns 6% quarterly, and Basim receives 16 quarterly payments starting October 1, 2017. To find when the annuity was purchased, we calculate the time needed for the investment to grow to cover the payments. Working backward from the first payment date, the purchase date is April 1, 2013.

Basim Purchased a Deferred Annuity from an Insurance Company for $10