Homework Answers
Annual payment = $3,750
Interest rate = 12%
Period of annuity = 10 years
Payments are made at the beginning of each year
Present value = $3,750 + $3,750/1.12 + $3,750/1.12^2 + …. +
$3,750/1.12^8 + $3,750/1.12^9
Present value = $3,750 * 1.12 * (1 - (1/1.12)^10) / 0.12
Present value = $3,750 * 6.328250
Present value = $23,730.94
Present value of annuity is $23,730.94
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