Ken Tuckie is about to buy a 25-year annuity that will deliver end-of-month payments. The first payment will be $1,000. How much more will it cost to index the annuity so that payments grow at the rate of 2.4% compounded monthly? Assume the money used to purchase the annuity earns 5.4% compounded monthly.

Compounded Monthly

The method of calculating interest where both the initial principal and the accumulated interest from prior months are considered in each month's interest calculation.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.