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28 September, 01:22

April Stigum will receive a 6 year annuity of $2,000 per year, beginning 7 years from today. In other words, the first payment will be made at the end of year 7. Assuming a required rate of return of 10%, calculate the present value today of her annuity. (Enter a positive value and round to 2 decimals

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  1. 28 September, 01:44
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    The present value today of her annuity=$4,469.87

    Explanation:

    Step 1 find An

    An=R[1 - (1+i) ^-n] : i

    An = (2000[1 - (1+0.10) ^-6]) : 0.10

    An=$8,710.52

    Step 2 find Present value today

    An=S

    P=S (1+i) ^-n

    P=8,710.52 (1+0.10) ^-7

    P=$4,469.87
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