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Homework answers / question archive / What is the present value of the following annuity? $4,012 every year at the end of the year for the next 9 years, discounted back to the present at 4

What is the present value of the following annuity? $4,012 every year at the end of the year for the next 9 years, discounted back to the present at 4

Finance

What is the present value of the following annuity?

$4,012 every year at the end of the year for the next 9 years, discounted back to the present at 4.68 percent per year, compounded annually?

Round the answer to two decimal places. INPUT FORMULA

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Computation of Present Value of Annuity using PV Function in Excel:

=-pv(rate,nper,pmt,fv)

Here,

PV = Present Value of Annuity = ?

Rate = 4.68%

Nper = 9 years 

PMT = $4,012

FV = 0

Substituting the values in formula:

=-pv(4.68%,9,4012,0)

PV or Present Value of Annuity = $28,927.37

 

Or we can calculate it as follows:

Present Value of Annuity = Annuity*[1-(1+Interest Rate)^-Time Period]/Rate

=4012*[1-(1.0468)^-9]/0.0468

=4012*7.21021204

=$28927.37

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