Question

Suppose you can save $200 per year at the end of each year for 15 years and earn 5.49% interest per year. However, you cannot start saving for six years, so the first payment occurs in the six year. What is the present value of this annuity? On excel.

Answer 1

		First Payment Occurs at end of Year6
	Rate	Rate of interest per year	5.49%
	Nper	Number of years of savings	15
	Pmt	Amount of saving in each year	$200
	PV	Value of savings at end of YEAR 5	$2,009	(Using PV function of excel with Rate=5.49%,Nper=15,Pmt=-200)
	Fv	Value of savings at end of YEAR 5	$2,009
	Nper	Number of years from today	5
	Rate	Rate of interest per year	5.49%
	PV	Present Value of savings today	$1,538	(Using PV function of excel with Rate=5.49%,Nper=5,Fv=-20009)
										Clipboard Alignment Number Styles Cells - x fc =PV(D5,D6,-07) A B D E F G H 5.49% First Payment Occurs at end of Year6 Rate of interest per year Number of years of savings Amount of saving in each year Value of savings at end of YEAR 5 Rate Nper Pmt PV 15 $200 $2,009 (Using PV function of excel with Rate=5.49%,Nper=15, Pmt=-200) for =PV(D12,011,-D10) D13 : AB D E F G H I J K Rate Nper First Payment Occurs at end of Year6 Rate of interest per year Number of years of savings Amount of saving in each year Value of savings at end of YEAR 5 5.49% 15 $200 $2,009 PV (Using PV function of excel with Rate=5.49%,Nper=15, Pmt=-200) $2,009 Nper Rate PV Value of savings at end of YEAR 5 Number of years from today Rate of interest per year Present Value of savings today 5.49% $1,538 (Using PV function of excel with Rate=5.49%,Nper=5,Fv=-20009) 14