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If you put up $25,000 today in exchange for a 8.50 percent, 19-year annuity, what will the annual cash flow be

Sagot :

Cricetus

Answer:

The right solution is "$2697.54".

Explanation:

Given:

Interest rate,

r = 8.50%

or,

 = 0.085

Number of periods,

n = 19

Present value,

= $25,000

As we know,

⇒  [tex]Present \ value=C\times \frac{[1-(1+5)^{-n}]}{r}[/tex]

By substituting the values, we get

⇒                [tex]25000=C\times \frac{[1-(1+0.085)^{-19}]}{0.085}[/tex]

⇒                 [tex]2125=C\times [1-0.21224378136][/tex]

⇒                 [tex]2125=C\times 0.787756219[/tex]

⇒                     [tex]C=\frac{2125}{0.787756219}[/tex]

⇒                         [tex]=2697.54[/tex] ($)

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