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Suppose an annuity will pay $18,000 at the beginning of each year for the next 8 years. How much money is needed to start this annuity if it earns 6.9%, compounded annually?

  • Math -

    Do annuity payments stop at death? Or is lump sum payment made to a beneficiary? If either case, age and actuarial data on life expectancy are needed.

  • Math -

    The present value of the annuity (due)
    An=P*(1-v^n)/(1-v) where v=1/(1+i)
    P=18000, n=8, i=0.069


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