Question

Compute the present value of a risk-free five-year annuity of $2,500 per year, given the following yield curve for January 2019.

Year	Yield
1	0.35%
2	0.79%
3	1.16%
4	1.69%
5	2.11%

Answer 1

Year	Rate	Value	× factor	Beginning value
5	2.11%	2,500.00	0.97933601	2,448.34
4	1.69%	4,948.34	0.983380863	4,866.10
3	1.16%	7,366.10	0.988533017	7,281.64
2	0.79%	9,781.64	0.992161921	9,704.97
1	0.35%	12,204.97	0.996512207	12,162.40

Present value of annuity is 12,162.40