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2 November, 09:03

What's the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,800 at the end of Year 4 if the interest rate is 5%

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  1. 2 November, 10:16
    0
    present value is $11104.38

    Explanation:

    given data

    time = 4 year

    annuity = $2250

    additional = $3800

    rate = 5 %

    to find out

    present value

    solution

    to find present value we will apply here formula that is

    present value = annuity * annuity factor (5%) + additional * discounting factor ... 1

    put here all these value in equation 1

    present value = 2250 * 3.5460 + 3800 * 0.8226

    present value = 11104.38

    so present value is $11104.38
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