Calvin just inherited an annuity that promises to pay $50,000 per year for 10 years, beginning...

Calvin just inherited an annuity that promises to pay $50,000 per year for 10 years, beginning 15 years from today. Assuming a required rate of return of 10%, Calculate the present value of the annuity.

Expert Solution

Year	Annuity	PVF at 10%	Present values
1	0	0.909091	0
2	0	0.826446	0
3	0	0.751315	0
4	0	0.683013	0
5	0	0.620921	0
6	0	0.564474	0
7	0	0.513158	0
8	0	0.466507	0
9	0	0.424098	0
10	0	0.385543	0
11	0	0.350494	0
12	0	0.318631	0
13	0	0.289664	0
14	0	0.263331	0
15	50000	0.239392	11969.6
16	50000	0.217629	10881.46
17	50000	0.197845	9892.233
18	50000	0.179859	8992.939
19	50000	0.163508	8175.4
20	50000	0.148644	7432.181
21	50000	0.135131	6756.529
22	50000	0.122846	6142.299
23	50000	0.111678	5583.908
24	50000	0.101526	5076.28
Present value of annuity			80902.83

Value of Annuity today = $ 80902.83

jeff jeffy answered 2 years ago

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