Noah wants to buy a 5 year annuity that pays $1000 at the end of each year, starting one year from now. it earns interest at 6.25% compounded annually. how much will it cost him? include in your -- calculations for n and - what formula you are using - answer to the question âº

cost is $4183.87

Step-by-step explanation:

given data

time t = 5 year

amount A = $1000

rate r = 6.25 %  = 0.0625

to find out

how much it will cost

solution

we will apply here formula for present value of annuity that is express as

present value = amount ×      ....................1

put here all these value we get cost we will pay

present value = amount ×

present value = 1000 ×

present value = 4183.869221

so cost is $4183.87