Question
What is today's value of 5 annual payments of $10,000 that begin one year from today? You could actually use the present value of 1
What is today's value of 5 annual payments of $10,000 that begin one year from today? You could actually use the present value of 1 table as demonstrated by illustration E-8, which takes a great deal of work. Thank goodness for the present value of an annuity table as presented on page E-10. Just go down to however many payments you have in the problem (the number of payments must be the same as periods) then go across to find your factor for the given interest rate. Then all you have to do is multiply the annuity by the factor to arrive at the present value of the annuity. Review illustration E-16 and answer the following question: 1. You are making payments of $1,000 into your retirement account for the next 10 years starting one year from today, and you can earn 7% over this time period. What is the present value of these payments? Show your work.
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