What is the present value (PV) of an Annuity that pays $2,000 in the next 5...

 

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What is the present value (PV) of an Annuity that pays $2,000 in the next 5 years, as a 5% interest on investment? Assume that current interest rate is 3%, annually compounded and the same for all the years, payments are distributed at the end of each year and final payment is made at the end of 5th year. Hint (slide 23 in .pptx): Present Value of Annuity = sum of discounted cash flows. Or alternatively, Present Value of Annuity Present value of annuity regular payments + present value of the initial payment, which will be returned at the end. What is the present value (PV) of an Annuity that pays $2,000 in the next 5 years, as a 5% interest on investment? Assume that current interest rate is 3%, annually compounded and the same for all the years, payments are distributed at the end of each year and final payment is made at the end of 5th year. Hint (slide 23 in .pptx): Present Value of Annuity = sum of discounted cash flows. Or alternatively, Present Value of Annuity Present value of annuity regular payments + present value of the initial payment, which will be returned at the end.

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To calculate the present value of an annuity we need to find the present value of each of the paymen... View the full answer