Your aunt is about to retire, and she wants to buy an annuity that will supplement her income by $65,000 per year for 25 years, beginning a year from today. The going rate on such annuities is 6.25%. How much would it cost her to buy such an annuity today

$811,540.16 would it cost her to buy such an annuity today

Solution:

Given

Annuity that would increase the profits by $65,000 a year over 25 years

The existing premium on these annuities is 6.25 a cent.

N                                                     25

I/YR                                           6.25%

PMT                                         $65,000

FV                                              $0.00

PV                                          $811,540.16