Question

What is the present value of an annuity that consists of 20 semiannual payments of $9000 at the interest rate of 7% per year, compounded semiannually? (Round your answer to the nearest cent.)

Answer 1

$130,584.60.

Explanation:

P = PMT * [(1 - (1 / (1 + r)^n)) / r]

where P is the present value, PMT is the payment amount, r is the interest rate per period, and n is the number of periods.

Plugging in the given values, we get:

P = 9000 * [(1 - (1 / (1 + 0.035)^20)) / 0.035]

P = 9000 * [0.5078 / 0.035]

P = 9000 * 14.5094

P = $130,584.60

Therefore, the present value of the annuity is $130,584.60.