Today you are purchasing a 20 year 8 percent annuity at a cost of $120000 the annuity will pay annual payments starting one year from today what is the amount of each payment 

To calculate the amount of each payment for the 20-year annuity, we will use the formula for the present value of an ordinary annuity:

\[
PV = P \times \left( \frac{1 - (1 + r)^{-n}}{r} \right)
\]

Where:
- $ PV $ is the present value (the cost of the annuity, $120,000),
- $ P $ is the annual payment (what we are solving for),
- $ r $ is the annual interest rate (8% or 0.08),
- $ n $ is the number of payments (20 years).

Rearranging the formula to solve for $ P $:

\[
P = \frac{PV \times r}{1 - (1 + r)^{-n}}
\]

Substituting the known values:

\[
P = \frac{120000 \times 0.08}{1 - (1 + 0.08)^{-20}}
\]

Let's calculate the amount of each payment.The amount of each annual payment for the 20-year, 8% annuity will be approximately $12,222.27.

Do you need any further details or clarifications?

Here are 5 related questions to expand on this:
1. How would the payments change if the interest rate were 6% instead of 8%?
2. What would be the total amount received over the 20 years?
3. How does the formula change for an annuity with monthly payments?
4. How do taxes impact the effective return on this annuity?
5. What happens if you withdraw the annuity early?

**Tip:** Always ensure you're distinguishing between annuities that make payments at the start (annuity due) and those that pay at the end of each period (ordinary annuity).

Today you are purchasing a 20 year 8 percent annuity at a cost of $120000 the annuity will pay annual payments starting one year from today what is the amount of each payment

Find out how to calculate the annual payment of a 20-year annuity with 8% interest and a $120,000 present value. This solution uses the Present Value of an Annuity formula to determine the payment amount step by step.

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