Question

Bertina plans to retire in 4 years. She plans to collect annual payments of $53,800 for several years. Her first annual payment is expected to be received in 5 years and her last annual payment is expected in 11 years. She can earn 10.23 percent per year. How much money does Bertina expect to have in 4 years?

Answer 1

Bertina expect to have $259949.31 OR $259949 in 4 years

Explanation;

For knowing about the money does Bertina expect to have in 4 years, we have to calculate present value of all cash inflows from year 5 to year 11. Which are total 7 years period;

Year	Cash inflows	Discounting factor @ 10.23%	Present value
1	$53800	(1.1023)^1	$48807.04
2	$53800	(1.1023)^2	$44277.46
3	$53800	(1.1023)^3	$40168.24
4	$53800	(1.1023)^4	$36440.39
5	$53800	(1.1023)^5	$33058.51
6	$53800	(1.1023)^6	$29990.48
7	$53800	(1.1023)^7	$27207.19
Total present value			$259949.31