You can purchase an annuity that pays $1000 per year for 5 years. The first payment will be received exactly one year from today. If the interest rate is 8%, compounded quarterly, what is the most you would be willing to pay for the annuity (rounded to the next $)?

A quarterly compounded investment of $10,000 is expected to grow to $20,000 in 7 years. What is the underlying effective annual interest rate?

Answer rating: 100% (QA)

To calculate the present value of the annuity we can use the formula for the present value of an ann... View the full answer