On December 30 2017 Madeline is approached by an investment

On December 30, 2017, Madeline is approached by an investment advisor offering an annuity that would pay her $2,000 a month starting on January 1, 2018 and on the first day of each month thereafter with the last payment on December 1, 2018. Similar annuities are currently paying 6.50%. What is the most Madeline should pay on December 30, 2017 for this annuity (Hint: Set your financial calculator to Begin mode and P/YR to 12)? Don’t forget to set your calculator to End mode when you’re done!

a.

$24,000.00

b.

$23,274.36

c.

$23,301.47

d.

$23,651.21

e.

$23,112.84

Solution

FV = 0, N = 12, PMT = 2000, rate = 6.50%/12

use PV function in Excel with type as 1

most that she should pay = 23,301.47