Question

Suppose you are going to receive $14,500 per year for five years. The appropriate interest rate is 8 percent. a-1. What is the present value of the payments if they are in the form of an ordinary annuity

Answer 1

Answer:

PV of annuity = $57894.29554 rounded off to $57894.30

Explanation:

An annuity is a series of cashflows that are of constant amount, occur after equal intervals of time and are for a finite/limited time period. An ordinary annuity is a kind of annuity where cash flows occur at the end of each period. The formula to calculate the present value of an annuity is attached.

PV annuity = 14500 * [ (1 - (1+0.08)^-5) / 0.08]

PV of annuity = $57894.29554 rounded off to $57894.30