The annually compounded discount rate is 5.5%. You are asked to calculate the present value of a

Question:

The annually compounded discount rate is 5.5%. You are asked to calculate the present value of a 12-year annuity with payments of $50,000 per year. Calculate PV for each of the following cases.

a. The annuity payments arrive at one-year intervals. The first payment arrives one year from now.

b. The first payment arrives in six months. Following payments arrive at one-year intervals (i.e., at 18 months, 30 months, etc.).

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...