Question

What is the present value of $7,000 paid at the end of each of the next 52 years if the interest rate is 7 % per year ? The present value is $ (Round to the nearest dollar.)

Answer 1

Present value of an ordinary annuity

Here, we’ve Annual Payment (P) = $7,000 per year

Annual interest rate (r) = 7.00% per year

Number of years (n) = 52 Years

Therefore, the Present Value of an Ordinary Annuity = P x [{1 - (1 / (1 + r) n} / r]

= $7,000 x [{1 - (1 / (1 + 0.07)⁵²} / 0.07]

= $7,000 x [{1 - (1 / 33.7253480)} / 0.07]

= $7,000 x [{1 - 0.0296513} / 0.07]

= $7,000 x [0.9703487 / 0.07]

= $7,000 x 13.8621245

= $97,035

“Hence, the Present Value of the annuity will be $97,035”