Question

What's the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,800 at the end of Year 4 if the interest rate is 5%

Answer 1

Answer:

present value is $11104.38

Explanation:

given data

time = 4 year

annuity = $2250

additional = $3800

rate = 5 %

to find out

present value

solution

to find  present value we will apply here formula that is

present value = annuity × annuity factor ( 5%) + additional × discounting factor    .......................1

put here all these value in equation 1

present value = 2250 × 3.5460 + 3800 × 0.8226

present value  = 11104.38

so present value is $11104.38