Question

A 10-year annuity pays $1,850 per month, and payments are made at the end of each month. If the APR is 12 percent compounded monthly for the first five years, and APR of 8 percent compounded monthly thereafter, what is the value of the annuity today?

Answer 1

Based on the amount the annuity pays per month and the APR, the value of the annuity today is $133,349.85.

What is the present value of the annuity?

First, find the present value of the annuity at 5 years:

= 1,850 x present value interest factor of annuity, 60 months, 8/12%

= 1,850 x 49.32

= $91,242

Then find the present value of the annuity from 5 years till date:

= (1,850 x present value interest factor of annuity, 60 months, 12/12%) + ( 91,242) / (1 + 1%)⁶⁰)

= (1,850 x 44.955) +  ( 91,242) / (1 + 1%)⁶⁰)

= $133,349.85

Find out more on the present value of annuities at brainly.com/question/24097261.

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