Posted by **beech** on Tuesday, October 11, 2011 at 11:06am.

Suppose a retiree wants to buy an ordinary annuity that pays her $2,000 per month for 20 years. If the annuity earns interest at 3.5% interest compounded monthly, what is the present value of this annuity?

- algebra -
**Steve**, Tuesday, October 11, 2011 at 11:43am
This is the same old problem. Just using different data.

r = 1 + .035/12 = 1.0029166666

2000 (r^240 - 1)/(r-1)

= 2000 * 1.011702/0.00291666

= $693,738.70

Before posting another of these, try using the formula.

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