Question

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What is the present value of the following annuity? $759 every year at the end of...

What is the present value of the following annuity?

$759 every year at the end of the year for the next 6 years, discounted back to the present at 17.51 percent per year, compounded annually?

Solutions

Expert Solution

Present value of annuity P×[1-(1÷(1+r)^n)]÷r
Here,
A Interest rate per annum 17.51%
B Number of years                                                                        6
C Number of compoundings per per annum                                                                        1
A÷C Interest rate per period ( r) 17.51%
B×C Number of periods (n) 6
Payment per period (P) $                                                               759
Present value of annuity $               2,688.37
759×(1-(1÷(1+17.51%)^6))÷17.51%

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