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What is the present value of $1,256 received at the end of each year for 7 years if you earn 5% on your investments?
What is the present value of $1,256 received at the end of each year for 7 years if you earn 5% on your investments?
Expert Solution
Answer :
PV of Annuity = Payments * [{1 - (1 + r)-n} / r]
= $1256 * [{1 - (1 + 0.05)-7} / 0.05]
= $1256 * [0.2893 / 0.05]
= $1256 * 5.7860
= $7267.22
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