34. What is the value of an annuity that pays $851 at the end of each...

34. What is the value of an annuity that pays $851 at the end of each year in years 5 through 14 at the end of year 14? The discount rate (opportunity cost) is 4.3%. (That is, find the value of this annuity at the end of year 14). Round to the nearest $1, no $ symbol.

Expert Solution

Since the payment is mentioned as made at year end, Year 5 payment is considered in year 6 and so on; Hence, for Year 14, the payment is considered in terminal year;

Annual Payments	851
Discounting Factor	4.30%


Period	1	2	3	4	5	6	7	8	9	10	11	12	13	14	Terminal
Payment						851	851	851	851	851	851	851	851	851	851
Discounting factor	1.0000	0.9588	0.9192	0.8813	0.8450	0.8102	0.7768	0.7447	0.7140	0.6846	0.6564	0.6293	0.6034	0.5785	0.5547
Discounted Payments	-	-	-	-	-	689	661	634	608	583	559	536	513	492	472
PV (Total of Discounted Payments)	5,746

Value of Annuity	5,746

jeff jeffy answered 1 year ago

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