Homework Answers
PV of Annuity(5 years from now) = Annuity * [{1 - (1 + r)-n} / r]
= $2,025 * [{1 - (1 + 0.07)-(23 - 5)} / 0.07]
= $2,025 * [0.7041 / 0.07]
= $2,025 * 10.0591 = $20,369.65
PV today = PV of Annuity(5 years from now) / (1 + r)n
= $20,369.65 / (1 + 0.07)5 = $20,369.65 / 1.4026 = $14,523.28
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