Question

Assume the appropriate discount rate is 5%. What is the value 4 years from today of an annuity that makes payments of $2,000 per year if the first payment is made 5 years from now and the last payment is made 9 years from now?

Answer 1

Present Value Of Annuity

Annuity – A fixed sum of money paid to someone – typically each year – and usually for the rest of their life.

Payment/Withdrawal Amount – This is the total of all payments received (annuity) or made (loan) receives on the annuity.

Annual Interest Rate (%) – This is the interest rate earned on the annuity. The present value annuity calculator will use the interest rate to discount the payment stream to its present value.

Number Of Years To Calculate Present Value – This is the number of years over which the annuity is expected to be paid or received.

Present Value Of An Annuity – Based on your inputs, this is the present value of the annuity you entered information for. The present value of any future value lump sum and future cash flows (payments).

C = Cash flow per period (payment amount)

i = Interest rate

n = Number of payments

As per the above mentioned for 4 years :- present value annuity = 7,091.90

For 5 years = 8,658.95

For 9 years = 14,215.64