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    Calculating Present Value of Annuities

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    What is the Present Value of the following annuities?

    1. $2,500 a year for 10 years discounted back to the present at 7 percent.

    2. $70 a year for 3 years discounted back to the present at 3 percent.

    3. $280 a year for 7 years discounted back to the present at 6 percent

    4. $500 a year for 10 years discounted back to the present at 10 percent

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    Solution Preview

    Solution:

    1)
    $2,500 a year for 10 years discounted back to the present at 7 percent.
    C=periodic payment=$2500
    n=number of period=10
    i=discount rate per period=7%
    Present Value (P)of an ordinary annuity is given ...

    Solution Summary

    The solution explains the formulas and methodology to calculate present value of ordinary annuities.

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