## Annuity:

In the context of Finance, an annuity is a streak of periodic investments or payments made for a given investment horizon. The mechanism of annuity is generally resorted to when one has to accumulate significant retirement fund by making relatively small and regular annual investments.

The calculated value of the annual investment to be made every year for 20 years is option (c) $2,185. The value of the annual investment amount is given by: • {eq}P = F * \dfrac{i}{(1 + i)^ {n} - 1} {/eq} where; F = future value of the annuity =$100,000

P = annual investment amount

i = interest rate = 8% (or 0.08)

n = number of years = 20 years

{eq}P = 100,000 * \dfrac{0.08}{(1 + 0.08)^ {20} - 1} {/eq}

{eq}P = \$2,185.22 {/eq}