Suppose you are to receive a stream of annual payments (also called an "annuity") of $9000 every year for 3 years starting this year. This discount rate is 6%. What is the present value of these three payments? Show all your steps and demonstrate a good understanding.© BrainMass Inc. brainmass.com June 3, 2020, 10:26 pm ad1c9bdddf
Essentially, annuities are discounted in value for each year's payment due to the time value of money. In other words, a dollar today is worth more than a dollar tomorrow due to inflation, etc.
We use the formula PV=FV(1/(1+i)/n) ...
The solution calculates the present value of an annuity.