You just inherited some money, and a broker offers to sell you an annuity that pays $4,300 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

You just inherited some money, and a broker offers to sell you an annuity that pays $4,300 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You just inherited some money, and a broker offers to sell you an annuity that pays $4,300 at the end of
each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is
the most you should pay for the annuity?

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