Question

What is the value today of $3,100 per year, at a discount rate of 9 percent, if the first payment is received 5 years from today and the last payment is received 15 years from today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Present value of annuity for 10 years =$\frac{1-(1+0.09)^{-10}}{0.09}\times3100$

=19894.74

Present value for 5 years = $\frac{19894.74}{(1+0.09)^5}$

=12930.22

Value today is 12930.22