What is the value today of $4,400 per year, at a discount rate of 9 percent, if
ID: 2623502 • Letter: W
Question
What is the value today of $4,400 per year, at a discount rate of 9 percent, if the first payment is received 5 years from today and the last payment is received 15 years from today?Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Please show how you got the answer!!
What is the value today of $4,400 per year, at a discount rate of 9 percent, if the first payment is received 5 years from today and the last payment is received 15 years from today?Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Please show how you got the answer!!
Explanation / Answer
This is effectively a stream of annuity payments starting at year 5 and ending at year 15, i.e. 11 annuity payments of 4,400 each.
The value of this as of year 4 can be calculated in Excel as =PV(9%,11,-4400). This is equal to 29,942.84
So current value as of today = 29,942.84 / 1.09^4 = $ 21,212.26
Answer: $ 21,212.26
Hope this helped ! Let me know in case of any queries.
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