You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. you could earn 5% on your money in other investments with equal risk. what is the most you should pay for the annuity?
a. $50,753.
b. $53,424.
c. $56,236.
d. $59,195.
e. $62,311.

most pay for annuity is $62311

option E is correct

Step-by-step explanation:

given data

annuity A = $5,000

time t = 20 year

rate r = 5%

to find out

most pay for annuity

solution

we will apply here FV formula that is

FV = A×R(1-) / (1-R)    ...............1

here R = 1/ ( 1+r) = 1/1.05

put here all value in equation 1

FV = A×R(1-) / (1-R)

FV = 5000×(1/1.05)×(1-) / (1-1/1.05)

Fv = 62311.05

so most pay for annuity is $62311

option E is correct

x = 12

y = 15

step-by-step explanation: