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Free_Kalibri [48]
3 years ago
11

A thirty-year annuity has end-of-month payments. The first year the payments are each $120. In subsequent years each payment inc

reases by $5 over what it was the previous year. Find the present value of the annuity if i D 3%:
Business
1 answer:
Sholpan [36]3 years ago
7 0

Answer:

NPV of the annuity = $209,782.38

Explanation:

Note: See the attached file to see how the Present Values (PV) and the Net Present Value (NPV) are calculated.

The following explanation should be read with the attached.

i = Monthly interest rate = 3%/12 = 0.25%, or 0.0025

DF = Discounting factor = (1 + i)^n = (1 + 0.0025,  where n denotes relevant month

Number of months = 30 years * 12 months = 360 months

CF = Cash Flow = P + 5, where P denotes previous payment

Download xlsx
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