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Homework answers / question archive / How much you need for an ordinary annuity of $800 paid every 3 months for 8 years if you could invest your money elsewhere at an interest rate of 20% compounded quarterly?
How much you need for an ordinary annuity of $800 paid every 3 months for 8 years if you could invest your money elsewhere at an interest rate of 20% compounded quarterly?
Computation of Present Value of Annuity using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Present Value of Annuity = ?
Rate = 20%/4 = 5% compounded quarterly
Nper = 8 years*4 quarters = 32 quarters
PMT = $800
FV = 0
Substituting the values in formula:
=-pv(5%,32,800,0)
PV or Present Value of Annuity = $12,642.14
