Question

Mr. Smith wants to give his son an annuity of $4,800 per year starting on his 21st birthday, which will be increased to $9,600 per year on his 25th birthday, with the final payment on his 30th birthday. What is the present value of that annuity on his son's 10th birthday if the effective annual rate of interest is 5%? Hint: Draw a diagram. You will need to break the payments into two payment streams. Pick a reference point to determine the value of each payment stream at the point of reference and then move them to the time of the 10th birthday.

Answer 1

Answer) 35059.42

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