Question

Problem 5-12 Present Value of an Annuity Due (LG5-6) If the present value of an ordinary, 8-year annuity is $8,900 and interest rates are 10.0 percent, what's the present value of the same annuity due? (Round your answer to 2 decimal places.) Present value

Answer 1

$\large Present Value Annuity Due = Cash flow * \frac{1-\frac{1}{(1+r)^n}}{r}$

$\large = 8900 * \frac{1-\frac{1}{(1+0.10)^8}}{0.10}$

= 8,900 * 5.3349

= $47,480.61

Present Value Annuity Due = $ 47,480.61

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