You will receive 29 annual payments of $23,500. The first payment will be received 8 years...

Question

Question

You will receive 29 annual payments of $23,500. The first payment will be received 8 years from today and the interest rate i

Answer 1

Answer #1

PV of payments at start of year 7 =

PVordinary Annuity

PV_{Ordinary Annuity} = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

PV= 23500*((1-(1+ 5.2/100)^-29)/(5.2/100))

PV = 348024.87

PV today

Future value = present value*(1+ rate)^time

348024.87 = Present value*(1+0.052)^7

Present value = 244061.964

Answer 2

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