Question

Uptown Insurance offers an annuity due with semi-annual payments for 25 years at 6 percent interest. The annuity costs $200,000 today. What is the amount of each annuity payment?

Answer 1

Answer:

PMT = $7,773

Explanation:

n = 25 years = 50 payments (since the annuity due with semi-annual payments)

i/r = 6% annually = 3% semi-annually

PV = 200,000 (given)

FV = 0 ( No future value at end of 25th year is given)

PMT = ? (THis is the missing value we need to calculate - the amount of annuity payment)

Using financial calculator, we  have:

PMT = $7,773