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You are considering the purchase of a delayed annuity. The annuity will pay you $200 per year for 15 years, but you will not receive the first payment one year from now--the first payment will be received 6 years from now. If the interest rate is 9%, what is the most you would pay for the delayed annuity today? Round your answer to 2 decimal places, for example 100.12.NEED SOLUTION BY HAND NOT EXCEL

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Answer #1

Present value of cash flows=Cash flows*Present value of discounting factor(rate%,time period)

=200/1.09^6+200/1.09^7+200/1.09^8+.............+200/1.09^20

=200[1/1.09^6+1/1.09^7+1/1.09^8+..............+1/1.09^20]

=$200*5.238894406

which is equal to

$1047.78(Approx).

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