Question

what is the present value of $500 received at the end of each of the next five years worth to you today at the appropriate discount rate of 6 percent?

Answer 1

Solution:
	Present value =$2,106.18
Working Notes:
	present value of annuity = Px[ 1-1 /(1 + i)^n)]/ i
	P=Annual payment = $500
	i= interest rate per period = 6% = 0.06
	n= no. Of period = 5
	present value of annuity = Px[ 1-1 /(1 + i)^n)]/ i
	= 500 x (1-1/(1+0.06)^5)/0.06
	=2,106.181893
	=$2,106.18
	present value of $500 received at the end of each of the next five years worth to you today is the present value of annuity of $500 per annum @ 6% is $2,106.18
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