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Question 2 A company expects to receive 10 level annual payments of £22,500 from a customer starting on 1 July 2019 and finis

Can anyone help me with this.
I am don't know whether this is a deferred annuity in arrears and it's just an annuity in arrears.
as I am getting £1702014.78 I am not sure if that's correct.

thanks

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Answer #1

First, annual effective interest rate should be calculated from the given nominal interest rate convertible monthly.

The annual interest rate is calculated below:

i =1+ р -1 Here, i is annual effective interest rate, įP is nominal interest rate convertible pthly, pis number of period in

The present value of annuity is calculated below:

1-(1+1) 1-(1+) 1-(1+0.061677812) 1-(1 0.061677812) Present value Annual payment: -10 = £22,500x 0.4503672666 = £22,500x 0.058

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