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You have a chance to buy an annuity that pays $2,500 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

$5,493.71


$5,782.85


$6,087.21


$6,407.59


$6,744.83

Respuesta :

Answer:

$6,744.83

Explanation:

In this question, we use the present value formula which is shown in the spreadsheet.  

The NPER represents the time period.

Given that,  

Future value = $0

Rate of interest = 5.5%

NPER = 3 years

PMT = $2,500

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the answer would be $6,744.83

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