A 25-Year Annuity Is Purchased for $650,000

question 71

Multiple Choice

A 25-year annuity is purchased for $650,000. Determine the payments it will deliver on a quarterly basis if the rate of interest is 5.05% compounded monthly.

• A) $10,554.66
• B) $11,004.66
• C) $11,504.66
• D) $12,004.66
• E) $12,554.66

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Definitions:

Island Arc

A chain of volcanically active islands arranged in an arc, situated along the boundary of tectonic plates, generally forming over a subducting plate.

Avalonia

An ancient microcontinent or terrane whose history is recorded in the rocks of Eastern North America, the British Isles, and mainland Europe.

Subduction

The geological process by which an oceanic tectonic plate is forced beneath another plate, contributing to geologic phenomena such as mountain building.

Sierra Nevada

A mountain range in the Western United States, known for its striking landscapes, ski resorts, and hiking trails.