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What is the present value of an annuity that pays $58 per year for 13 years and an additional $1,000 with the final payment
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14 votes
14 votes
What is the present value of an annuity that pays $58 per year for 13 years and an additional $1,000 with the final payment

User Altabq
by
2.3k points

1 Answer

14 votes
14 votes

Answer:

$882.03

Step-by-step explanation:

Interest rate used is 7.23%

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1 to 12 = 58

cash flow in year 13 = 1058

I = 7.23

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

User Matthew Abrman
by
2.9k points
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