Question

Amount of annuity expected 15000

Quarterly

4 years

8%

Present value

Answer 1

203,665.63

Explanation:

Given:

Amount of annuity expected = 15000

Period = 4 years

Rate = 8%

for quarterly, rate, r = 0.08 / 4 = 0.02

total quarters in 4 years, n = 4 × 4 = 16

Now,

The present value is given as:

`\textup{Present value}=\textup{Annuity}*[(1-(1+r)^(-n))/(r)]`

on substituting the respective values, we get

`\textup{Present value}=15000*[(1-(1+0.02)^(-16))/(0.02)]`

or

Present value = 203,665.63