Question

An eight-year annuity that makes 96 monthly payments of $9,200 will begin 10 years from now with the first payment coming ten years and one month from now. If the discount rate is 7 percent compounded monthlywhat is the present value of the annuity? \$33^ 5 $337,735.48 377,199.53 $360,050.11

Answer 1

PV of Annuity after 10 Years =

Particulars	Amount
Cash Flow	$      9,200.00
Int Rate	0.583%
Periods	96

r - Int Rate per Month

n - No. of Months

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r

= $ 9200 * [ 1 - [(1+0.0058)^-96]] /0.0058

= $ 9200 * [ 1 - [(1.0058)^-96]] /0.0058

= $ 9200 * [ 1 - [0.5721]] /0.0058

= $ 9200 * [0.4279]] /0.0058

$             6,74,797.63

PV Today = PV after 10 Years * PVF(r%, n)

r - Int Rate per Month

n - No. of Months

= $ 674797.63 * PVF(0.5833%, 120 )

= $ 674797.63 * 0.4976

= $ 335776.8

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