Suppose that you have inherited an annuity that will pay $1000 for 50 years. A) Assuming...

Suppose that you have inherited an annuity that will pay $1000 for 50 years.

A) Assuming that the first payment occurs exactly one year from now and that the annual opportunity cost of capital is 10% , what is the value of this annuity today? Round your final answer to two decimals.

B) Assuming that the first payment occurs immediately and that the annual opportunity cost of capital is 10%, What is the value of this annuity today? Round your final answer to two decimals.

Expert Solution

A)Value of annuity today =PVA10%,50* Annuity

= 9.91481 *1000

= $ 9914.81

B)Value of annuity today =PVAD10%,50*annuity

= 10.90630*1000

= $ 10906.30

**Find annuity factor and annuity due factor from their table respectively at 10% for n= 50

jeff jeffy answered 5 months ago

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