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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?

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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:

r

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 2 years ago
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