Question

What is the value today of $1,400 per year, at a discount rate of 8 percent, if the first payment is received 7 years from now and the last payment is received 29 years from today?

Answer 1

Step 1 :	Value of annuity 7 years from today
	Present Value Of An Annuity
	= C*[1-(1+i)^-n]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period
	= $1400[ 1-(1+0.08)^-22 /0.08]
	= $1400[ 1-(1.08)^-22 /0.08]
	= $1400[ (0.8161) ] /0.08
	= $14,281.0411
Step 2 :	Today value
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number
	= $14281.0411/( 1+0.08)^7
	=14281.0411/1.71382
	= $8332.85