(1) You have the opportunity to purchase an annuity that pays $5,000 at the beginning of each year for 5 years. You could earn 4.5% of your money on other investments with the same risk. What is the most you should pay for the annuity?

(2) You have the opportunity to purchase a perpetuity that pays $74 per year. What is the most you would have to pay for the perpetuity if you could earn 7.44% of your money on other investments with the same risk?

Answer rating: 100% (QA)

1 To determine the most you should pay for the annuity you can calculate the p... View the full answer