Answer to Question #134423 in Financial Math for Aishworjo Rahman

Question

Mr. Jhon will receive $7500 a year for the next 15 years from Mutual Trust Bank. If an 9% interest is applied, what is the current value of the future payments?

Answer 1

Present Value Annuity(PVA)= amount X (1-(1+r)^-n)/ r

amount = $7500

n = 15years

r = 9%

PVA = 7500 X (1-(1+0.09)^-15)/r

PVA= (7500 X 0.7255)/0.09

PVA = $60,458.33

So the current value of the future payments will be $60,458.33