Question

Question #2 50,000 per You would like to setup a series of fixed payments where you will receive S year for 20 years. You would like this series of fixed payments to begin at the end o year 5. If the current interest rate for fixed payments is 6%, what is t have to pay today? What is the definition of this type of arrangement? he price you will Price of the arrangement: Definition of this arrangement:

Answer 1

Interest rate = 6%

Now we need to have 50,000 for 20 years starting after 5 years.

So 50,000 is our annual payment

PMT Annual payment FV RATERate NPER Time $ 50,000.00 C) 6% 20 Future value $573,496.06 If Present Value l his value is bi1%ǐcally future value of !> Yesa invesįTiKY1t which we will do ixlay ill do today So Future value $573,496.06 6% Time PMT C) Present value today $428,549.62

Use PV () function to find the present values

Note that present value we have found in 1st part is basically value we need after 5 years.

So that is future value of today's investment

This arrangement is called "Annuity"