You Are Considering an Annuity That Costs $100,000 Today

question 52

Multiple Choice

You are considering an annuity that costs $100,000 today.The annuity pays $6,000 a year.The rate of return is 4.5 percent.What is the length of the annuity time period?

• A)24.96 years
• B)29.48 years
• C)31.49 years
• D)33.08 years
• E)38.00 years

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Definitions:

Residual Value

The estimated value of an asset at the end of its useful life.

Internally Generated Goodwill

The increase in value of a business due to factors like reputation, brand, customer base, and relationships that are developed internally over time and not acquired or purchased.

Intangible Asset

An asset that lacks physical substance and usually represents legal rights or competitive advantages (e.g., patents, trademarks, copyrights).

Office Building

A structure designed for the operations of businesses, providing workspaces and offices for use by employees and management.