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 answer: -- Calculations for n and - What formula you are using - Answer to the question âº

Answer:cost is $4183.87 Step-by-step explanation:given data time t = 5 year amount A = $1000rate r = 6.25 %  = 0.0625to find outhow much it will cost solutionwe will apply here formula for present value of annuity that is express as present value = amount ×[tex]\frac{1-(1+r)^{-t}}{r}[/tex]      ....................1put here all these value we get cost we will paypresent value = amount ×[tex]\frac{1-(1+r)^{-t}}{r}[/tex] present value = 1000 ×[tex]\frac{1-(1+0.0625)^{-5}}{0.0625}[/tex] present value = 4183.869221 so cost is $4183.87