Joe has just retired and would like to convert some of his savings into an annuity that will pay him an equal amount each year for the next 5 years. If the current interest rate is 5.75%, how much money will he have to invest in order to receive $30,000 a year?
What will be an ideal response?
PDV = ($30,000/(1 + 0.575)) + ($30,000/(1 + 0.575)2) + ($30,000/(1 + 0.575)3) + ($30,000/(1 + 0.575)4) + ($30,000/(1 + 0.575)5) = $127,235.02
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What will be an ideal response?