Question

What is the present value of a 3-year annuity of $300 if the
discount rate is 7%? **(Do not round intermediate
calculations. Round your answer to 2 decimal places.)**

**b.** What is the present value of the annuity in (a)
if you have to wait an additional year for the first payment?
**(Do not round intermediate calculations. Round your final
answer to 2 decimal places.)**

Answer #1

a). Calculating the Present Value of Annuity started today using the Present value of Annuity due formula:-

Where, C= Periodic Payments = $300

r = Periodic Interest rate = 7%

n= no of periods = 3

**Present Value = $842.41**

b). Calculating the Present Value of Annuity started 1-year from today using the Present value of Ordinary Annuity formula:-

Where, C= Periodic Payments = $300

r = Periodic Interest rate = 7%

n= no of periods = 3

**Present Value = $787.29**

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