Question

What is the present value of an annuity if the size of each payment is ₱30,000 payable atthe end of each quarter for 10 years at an interest rate of 7% compounded quarterly?

Answer 1

The present value of an annuity A with with size P payable at the end of each quarter for n trimesters at an interest rate r is given by:

`A=P(\lbrack(1+r)^n-1\rbrack)/(r)`

For P = ₱30000, n = 4*10 = 40 and r = 0.07, we have:

`\begin{gathered} A=30000(\lbrack1.07^(40)-1\rbrack)/(0.07) \\ A=\text{ }₱5989053.36 \end{gathered}`