Question

How much would you pay today for an investment that provides you $2,830 each year for the

next 6 years, starting next year, and $11,126 12 years from now if the interest rate is 3.89% APR compounded annually?

Answer 1

Value of Investment = PV of CFs from it.

Year	CF	PVF @3.89%	Disc CF
1	$   2,830.00	0.9626	$   2,724.04
2	$   2,830.00	0.9265	$   2,622.04
3	$   2,830.00	0.8918	$   2,523.86
4	$   2,830.00	0.8584	$   2,429.36
5	$   2,830.00	0.8263	$   2,338.39
6	$   2,830.00	0.7953	$   2,250.84
12	$ 11,126.00	0.6326	$   7,038.08
Value of Investment			$ 21,926.60

Value of investment today is $ 21926.60

PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

Disc CF = CF * PVF(r%, n)