Question

​(Present value of an annuity​ due) Determine the present value of an annuity due of $ 6 comma 000 per year for 8 years discounted back to the present at an annual rate of 11 percent. What would be the present value of this annuity due if it were discounted at an annual rate of 16 ​percent?

Answer 1

Answer:

at 11%. (Present value of annuity) An=$30,876.74

at 16% (Present value of annuity) An=$26,061.55

Explanation:

Given R=6000, each year

          t = 8 yrs

          j(1) = 11%,

          j(2)=16%

         m= 1

find   An=?

We have i=j/m and n=m x t

Formula An={R[1-(1+i)^-n]} / i

                  ={6000x[1-(1+0.11)^-8]} : 0.11

                  =$30,876.74

An={R[1-(1+i)^-n]} / i

                  ={6000x[1-(1+0.16)^-8]} : 0.16

                  =$26,061.55