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Mariana [72]
3 years ago
12

An annuity will pay $1000 per year for 10 years, starting five years after today. What is the present value (PV) of this annuity

today, given that the interest rate is 7%?
Business
1 answer:
vodka [1.7K]3 years ago
7 0

Answer:

$5,007.72

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator.

Cash flow each year from year one to five = 0

Cash flow each year from year six to fifteen = $1000

I = 7%

Present value = $5,007.72

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

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