What is the present value of $3,200 per year, at a discount rate of 10 percent,
ID: 2796702 • Letter: W
Question
What is the present value of $3,200 per year, at a discount rate of 10 percent, if the first payment is received 6 years from now and the last payment is received 20 years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What is the present value of $3,200 per year, at a discount rate of 10 percent, if the first payment is received 6 years from now and the last payment is received 20 years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Total number of payments = 15
Present value at t =5
PV of annuity = P*[(1-(1+r)^(-n)) / r]
P - Periodic payment
r - rate per period
n - number of periods
PV of annuity = 3200*((1-(1+0.1)^(-15)) / 0.1) = 24339.45
Present value at t=5
PV = 24339.45/(1+0.1)^5 = $15112.89
Present value = $15112.89
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