You Own an Annuity Due Contract That Will Pay You

question 129

Multiple Choice

You own an annuity due contract that will pay you $3,000 per year for 12 years.You need money to pay back a loan in 5 years,and you are afraid if you get the annuity payments annually you will spend the money and not be able to pay back your loan.You decide to sell your annuity for a lump sum of cash to be paid to you five years from today.If the interest rate is 8%,what is the equivalent value of your 12-year annuity if paid in one lump sum five years from today?

• A) $22,008
• B) $18,000
• C) $35,876
• D) $38,880

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Definitions:

Homestead

A dwelling with its land and buildings, occupied by the owner as their primary residence, often associated with historical laws granting land to families for farming or settlement.

Petition of Committee

A formal request or appeal submitted to an authoritative body, often composed by a group or committee, advocating for a particular cause or action.

Land Monopoly

A situation where a significant portion of land is owned or controlled by a single individual or entity, limiting access for others.