the present value of an annuity for 2 years, with the first payment at the end...

the present value of an annuity for 2 years, with the first payment at the end of 10 years is 40,239 pesos. If money is worth 4.94%, what is the value of an annuity for 5 years?

Expert Solution

Solution:

Given,

PMT(Annuity Payment) = 40239

r(Rate of interest) = 4.94%

n(Number of payments) = 5

Present value of annuity = PMT*(1-1/(1+r)ⁿ)/r)

= 40239*(1-1/(1+0.0494)⁵)/0.0494)

= 40239*(1-1/(1.272639)/0.0494)

=40239*((1.272639-1/1.272639)/.0494))

= 40239*(.272639/1.272639)/.0494

= 40239*0.2142314/.0494

=174503.17

Rahul Sunny answered 2 years ago

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