You will receive 27 annual payments of $22,500. The first payment will be received 7 years from today and the interest rate is 5.1 percent. What is the value of the payments today?

PV = $230,148.09

Explanation:

Giving the following information:

You will receive 27 annual payments of $22,500. The first payment will be received 7 years from today and the interest rate is 5.1 percent.

First, we need to calculate the final value of the payments. We need to use the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual pay = 22,500

n = 27

i = 0.051

FV = {22,500*[ (1.051^27) - 1]} / 0.051

FV = $1,248,819.52

Now, we can calculate the present value:

PV = FV / (1+i) ^n

PV = 1,248,819.52 / (1.051^34)

PV = $230,148.09