Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years. You require a 7% return. The present value annuity factor at 7% for 10 years is 7.0236. What is the most you should pay for this investment?
A)$49,179
B)$175,590
C)$201,000
D)$225,682
E)$250,000

Question

Quizplus · Accepted Answer

The present value of the annuity is calculated by multiplying the annual payment by the present value annuity factor: $25,000 * 7.0236 = $175,590.

Your Investment Advisor Wants You to Purchase an Annuity That