Question #257591

Consider an annuity of payments of 2.500$ at the end of every second year. What is the present value of this annuity if it runs for ten years and the interest rate is j1 = 7%?


1
Expert's answer
2021-11-01T07:17:25-0400

PV=C1(1+i)niPV=C\cdot \frac{1-(1+i)^{-n}}{i}

where C is cash flow per period,

i is interest rate,

n is number of payments


PV=25001(1+0.07)50.07=10250.49$PV=2500\cdot \frac{1-(1+0.07)^{-5}}{0.07}=10250.49\$


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