Question

A 20-year annuity pays 100 every other year beginning at the end of the second year, with additional payments of 300 each at the ends of years 3, 9 and 15. The effective annual interest rate is 4 percent. Calculate the present value of the annuity.

Answer 1

1,310

Step-by-step explanation:

= 100 / 1.042 + 300 / 1.043 + 100 / 1.044 + 100 / 1.046 + 100 / 1.048 + 300 / 1.049 + 100 / 1.0410 + 100 / 1.0412 + 100 / 1.0414 + 300 / 1.0415 + 100 / 1.0416 + 100 / 1.0418 + 100 / 1.0420

= 1,310 Approximately

So the correct answer is Approximately

,310

Answer 2

Approximately 1310

Step-by-step explanation:

= 100 / 1.042 + 300 / 1.043 + 100 / 1.044 + 100 / 1.046 + 100 / 1.048 + 300 / 1.049 + 100 / 1.0410 + 100 / 1.0412 + 100 / 1.0414 + 300 / 1.0415 + 100 / 1.0416 + 100 / 1.0418 + 100 / 1.0420

= 1,310 Approximately