Answer:
The value of the payment today = $36,539.65
Explanation:
<em>An annuity is a series of equal payment or receipt occurring for certain number of period. </em>
<em>The payment in question is an example of an annuity .Hence the value of the payment today would be the present value of 2,700 annuity discounted at the appropriate interest rate </em>.
This is done as follows:
The Present Value of annuity = A × (1- (1+r)^(-n))/r
A- periodic cash flow-2,700, r- semi annual rate of interest - 7.3/2= 3.65%
n- number of period- (9×2) + 1= 19. Note that we have 19 "six months" in 9 years 6 months
PV = 2,700 × (1- (1+0.0365)^(-19))/0.0365 =36,539.650
The value of the payment today = $36,539.65
