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31 October, 07:06

April received an inheritance from her grandmother in the form of an annuity. The annuity pays $3,000 on January 1st from 1966 through 1984. Find the value of this annuity on January 1, 1966 using an annual effective interest rate of 5% and represent this value by an appropriate annuity symbol.

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  1. 31 October, 07:46
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    PV1966 = $35,068.76

    Explanation:

    Giving the following information:

    April received an inheritance from her grandmother in the form of an annuity. The annuity pays $3,000 on January 1st from 1966 through 1984.

    To calculate the value of the annuity in 1966 we need to use the following formula:

    PV = C*{[1 - (1+i) ^-n]/i}

    C = periodic payment

    PV = 3000*{[1 - (1.05^-18) ]/0.05} = $35,068.76
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