You've bought an inflation-adjusted annuity to give you a constant real income during your retirement years.

• The annuity will make 20 annual payments.
• The first payment of $80,000 will occur one year from now
• Annual payments will then grow at the rate of inflation, 3%, for 19 more years and then stop. (There are 20 total payments and the last payment is made at the end of year 20.)
• The interest rate is 8%.

What is the present value of this growing annuity?

Answer rating: 100% (QA)

To calculate the present value of a growing annuity you can use the following formula PV C 1 1 ... View the full answer