Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years.If you require a 7% return,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 an annuity can be calculated using the formula: PV = PMT × [(1 - (1 + r)^-n) / r], where PMT is the annual payment, r is the interest rate, and n is the number of periods. Plugging in the values: PV = $25,000 × [(1 - (1 + 0.07)^-10) / 0.07] = $175,590.

Your Investment Advisor Wants You to Purchase an Annuity That