John will receive equal annual payments of $20,000 with her first payment received in 3 years from today

John will receive equal annual payments of $20,000 with her first payment received in 3 years from today and her last payment received 9 years from today. Find the present value of these payments at the beginning of year 4 (end of year 3) if the interest rate is 5.2%

Please provide a step by step process, thanks!

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Expert Solution

- John will receive Equal Payments of $20,000 with one payment at the end of year 3 and second payment at the end of year 9.

Calculating the Present Value at the end of year 3 of both payments:-

where, r = Interest rate = 5.2%

n = no of years from year end 3 for Cashflow at year end 3 = 3 years - 3 years = 0

m = no of years from year end 3 for Cashflow at year end 9 = 9 years - 3 years = 6

PV3 = $20,000 + $14,754.88

PV3 = $34,754.88

SO, the present value of these payments at the beginning of year 4 is $34,754.88

jeff jeffy answered 1 year ago

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