Answer:
$1,643,344.308
Explanation:
These are Ordinary annuities because if it is not mentioned that the payments are made at the <em>beginning </em>of the year which is the case for Annuity Due.
You can use a financial calculator to find the Present value of these two ordinary annuities.
<u> PV of Annuity 1 from (yr1-yr10)</u>
Recurring payment; PMT = 10,000
Total duration ; N = 10 *12 = 120 months
Monthly interest rate in this case ; I/Y = 6%/12 = 0.50%
Future value ; FV = 0 (use 0 if annuity variable is not given )
then CPT PV= $900,734.533
<u>PV of Annuity 1 from (yr11-yr20)</u>
This will happen in 2 steps sice it is a forward-starting annuity;
Recurring payment; PMT = 15,000
Total duration ; N = 10 *12 = 120 months
Monthly interest rate in this case ; I/Y = 6%/12 = 0.50%
Future value ; FV = 0 (use 0 if annuity variable is not given )
then CPT PV( at t=10)= $1,351,101.80
Next find the PV of $1,351,101.80 at t=0;
$1,351,101.80 /(1.005^120) = $742,609.7754
Next, find the sum of these two PVs to find the answer;
=$900,734.533 + $742,609.7754
PV = $1,643,344.308
