Kelly Green has a contract in which she will receive the following payments at the end of

Question:

Kelly Green has a contract in which she will receive the following payments at the end of the next five years: $3,000, $4,000, $5,000, $6,000 and $7,000. She will then receive an annuity of $9,000 a year from the end of the sixth year through the end of the 15th year. The appropriate discount rate is 13%. If she is offered $40,000 to cancel the contract, should she do it?

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...