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    alexriverajr's Avatar
    alexriverajr Posts: 2, Reputation: 1
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    #1

    Apr 30, 2009, 11:29 PM
    Value of a retirement annuity
    I have been hammering away at this question and I'm just looking for a validation.

    An insurance agent is trying to sell you an immediate-retirement annuity, which for a single amount paid today will provide you with $12,000 at the end of each year for the next 25 years. You currently earn 9% on low-risk investments comparable to the retirement annuity. Ignoring taxes, what is the most you would pay for this annuity?

    This is what I have come up with, I'm I correct:

    PRESENT VALUE OF AN ANNUITY
    Annuity $12,000.00
    Interest Rate, percentage per year 9%
    Number of Years 25
    Compounding periods 1
    Present Value of Ordinary Annuity $117,870.96

    Thanks in advance!
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    May 1, 2009, 12:49 AM

    Correct.

    Now what I'd like to know is how to find a "low-risk" investment that pays 9%. :p
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