Calculating the present value of given annuity
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An investment offers $3,800 per year for 12 years, with the first payment occurring one year from now. If the required return is 10 percent, the present value of the investment is $? If the payments occurred for 39 years, the present value of the investment would be $? If the payments occurred for 79 years, the present value of the investment would be $. If the payments last forever, the present value would be $?
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Solution Summary
Solution calculates the present value of given annuity for different periods.
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i) PV, if the payments are for 12 years
Periodic payment=R=$3800
Discount rate=i=10%
Number of periods=12
PV=R/i*(1-1/(1+i)^n)=3800/10%*(1-1/(1+10%)^12)= ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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