Question
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
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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Introduction to Finance Markets Investments and Financial Management
Authors: Melicher Ronald, Norton Edgar
15th edition
9781118800720, 1118492676, 1118800729, 978-1118492673
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