Question

Find the Present value of an ANNUITY DUE (i.e. payments are at the beginning of the period). It is 9 years, 8% and the payments are $1,000.

Answer 1

In order to calculate the present value of an annuity due, you can use a mathematical relation, where PV of an annuity due is equal to:

Here, P = $1000, r = 8%, n = 9 years

Substituting the values,

PV = 1000 + 5746.6389

PV = $6746.6389. Answer

{PV of an annuity due = PV of an ordinary annuity * (1 + r). SO in Excel, you could have calculated it in the following way:

}