Question

II. Find the present value of $10,000 received at the start of every year for 20 years if the interest rate is J1 = 12% p.a. and if the first payment of $10,000 is received at the end of 10 years.

Answer 1

1. Prenumerando annuity

PVA = A[(1-(n-i)^-n ) /(i)) ] (1+i)

1000[(1-(1+0.12)^-20 ) / (12))] (1+0.12)

= 83657.97

2. Annuity postnumerando

PVA = A[(1-(n-i)^-n ) /(i)) ] (1+i)

1000[(1-(1+0.12)^-2 ) / (0.12))]

= 16900.51