Answer:
The amount to be deposited today = $13,590.33
Explanation:
The amount to be paid for the annuity would the sum equal to the present value of the cash flow from the annuity. The present value of an ordinary annuity is determined using the relationship below:
PV of annuity = A× ( (1-(1+r)^(-n) )/r
A- Annual cash flow
r- interest rate per annul
n- Number of years
PV- Present Value of annuity'
DATA
A-1000
r- 4%
n- 20
PV = 1,000 ×( (1 - 1.04^(-20))/0.04 =$13,590.33
The amount to be deposited today = $13,590.33
