Question
Solve this problem using each method below. How much would you pay today for an annuity that pays you $5,000 for 4 years starting
Solve this problem using each method below. How much would you pay today for an annuity that pays you $5,000 for 4 years starting next year? Assume an interest rate of 12%. A. Use 4 different "single payment" PV calculations - 1 for each year. B. Use the PV Annuity formula. C. Use the sum of a finite geometric series (See 11.4.3). Two options here: a. Subtract the initial payment. Be careful about "n" and "k". Note that 11.4.3 has the b. first payment starting today. This situation starts 1 year from now. Use "a" as (a/(1+r)).
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