Contemplating the purchase of twenty-year variable annuity

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Reference no: EM131915739

You are contemplating the purchase of a twenty-year variable annuity that promises cash flows in the following pattern, repeating every four years:

1 $1,000

2 $1,200

3 $1,400

4 $1,600

....

17 $1,000

18 $1,200

19 $1,400

20 $1,600

What would you pay today (time zero) to acquire this annuity if your required rate of return was 8%, compounded quarterly?

Reference no: EM131915739

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