Question

What is the present value of a 3-year annuity of $300 if the discount rate is...

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.)


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Homework Answers

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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