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Five years ago, you paid for the right to receive twelve OMR 26
Five years ago, you paid for the right to receive twelve OMR 26.750 annual end-of-the-year cath flows. It discounting the cash flows at an annual cate of what did you pay for these cash flows back then? Select one a OMR 194,924.17 OM 217.09.08 SOMR22:1716 OMR35,732 OMR111 01150
Expert Solution
Present value of the Ordinary annuity
Annual payment (P) = OMR 26,750
Annual interest rate (r) = 5.00% per year
Number of periods (n) = 5 Years
Present Value of an Ordinary Annuity = P x [{1 - (1 / (1 + r) n} / r]
= OMR 26,750 x [{1 - (1 / (1 + 0.05)5} / 0.05]
= OMR 26,750 x [{1 - (1 / 1.276281563)} / 0.05]
= OMR 26,750 x [{1 - 0.783526166} / 0.05]
= OMR 26,750 x [0.216473834 / 0.05]
= OMR 26,750 x 4.329476671
= OMR 115,813.50
Hence, the Present value of the Ordinary annuity will be (e)- OMR 115,813.50
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