# Your father is about to retire, and he wants to buy an annuity that will provide him with $84,000...

## Question:

Your father is about to retire, and he wants to buy an annuity that will provide him with $84,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.15%. How much would it cost him to buy the annuity today?

a. $1,152,778.41

b. $1,226,360.01

c. $1,091,460.41

d. $1,459,368.41

e. $1,030,142.41

## Annuity Due:

An annuity due is a sequence of equal payments, delivered at a regular time interval, with each payment occurring at the beginning of each period. In the absence of any other factors, the present value of an annuity is always higher than that of an ordinary annuity.

## Answer and Explanation: 1

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View this answerThe correct answer is **b. $1,226,360.01**.

The cost today would be the present value of the annuity due. We can use the following formula to compute the...

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Chapter 8 / Lesson 3Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.

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