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What's the PV of a 3-year $10 annuity, if the quoted interest rate is 10%, compounded semiannually?
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5 votes
What's the PV of a 3-year $10 annuity, if the quoted interest rate is 10%, compounded semiannually?

User Claude Martin
by
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1 Answer

5 votes

Answer:

$50.75

Step-by-step explanation:

The present value of an annuity is calculated using the formula below.

PV = P × 1 − (1+r)−n

r

In this case,

P is $10

r is 10% per year or 0.1 per year 0.05 twice per year

n is 6 compounds

PV = 10 x 1-(1+0.05)-6

0.05

PV = 10 x 1 - 7462153966

0.05

PV = $10 X(0.253746034/0.05)

PV = $10 X 5.07492068

PV = $50.7492

PV = $50.75

User Amir Keibi
by
4.6k points
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