An annuity pays $53.00 each period for 4 periods. For these cash flows, the appropriate discount...

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An annuity pays $53.00 each period for 4 periods. For these cash flows, the appropriate discount rate per period is 7.0%. What is the present value of this annuity?

Present Value of Annuity:

The present value of an annuity refers to the real worth of the equal cash inflow received in the future. The present value of the annuity is of two types--one is an ordinary annuity and the second is an annuity due. The basic difference in both annuities is the timing of the payment.

Answer and Explanation: 1

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Calculation of present value of annuity

{eq}\begin{align*} {\rm\text{Present Value of Annuity}} &= PMT\left( {\frac{{1 - {{\left( {1 + r} \right)}^{...

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What is Annuity? - Definition & Formula

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Chapter 2 / Lesson 7
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An annuity is a fixed amount of income paid at regular intervals, such as monthly or quarterly. Learn the definition and formula for annuity, review examples of annuities, and understand how to determine the value of annuities.


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