In the previous question if you expect o receive the payment at the beginning of the...

In the previous question if you expect o receive the payment at the beginning of the year instead of the end of they year, how much the payments are worth now?

Solutions

Expert Solution

If the payments are received at the beginning of each year, the annuity is Annuity Due. Present value of this annuity= $ 43,121.27 as follows:

Note:

PV of annuity Due can also be arrived at by multiplying the PV of ordinary annuity by (1+r)

PV of ordinary annuity (previous question)= $39,927.10

PV of annuity due= $39,927.10*(1+0.08)= $43,121.27

jeff jeffy answered 1 year ago

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