Answer:
The annuity is worth $83,419.93.-
Explanation:
Giving the following information:
Suppose you bought a 25-year annuity of $8,500 per year at the current discount rate of 9 percent per year.
First, we need to calculate future value. We will use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= cash flow
FV= {8,500*[(1.09^25) - 1]} / 0.09
FV= $719,957.62
Now, the present value:
PV=FV/(1+i)^n
PV= 719,957.62/(1.09^25)
PV= $83,419.93
