Question

In: Finance

You are scheduled to receive annual payments of $8,700 for each of the next 23 years....

You are scheduled to receive annual payments of $8,700 for each of the next 23 years. The discount rate is 8.0 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year?

a. $7,642.82

b. $8,409.42

c. $9,396.00

d. $8,700.00

e. $7,218.26

Expert Solution

Calculate the present value of the annuity if payments are made at the end of the year as follows:

Therefore, the present value annuity if payments are made at the end of the year is $90,228.21.

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Calculate the present value of the annuity if payments are made at the beginning of the year as follows:

Therefore, the present value annuity if payments are made at the end of the year is $97,446.47.

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Calculate the difference as follows:

Difference = $97,446.47 - $90,228.21

= $7,218.26

Therefore, the difference is $7,218.26.

Therefore, Option E is correct.

jeff jeffy answered 1 year ago

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