An annuity pays $53.00 each period for 4 periods. For these cash flows, the appropriate discount...
Question:
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
Become a Study.com member to unlock this answer! Create your account
View this answerCalculation of present value of annuity
{eq}\begin{align*} {\rm\text{Present Value of Annuity}} &= PMT\left( {\frac{{1 - {{\left( {1 + r} \right)}^{...
See full answer below.
Learn more about this topic:
Get access to this video and our entire Q&A library
What is Annuity? - Definition & Formula
from
Chapter 2 / Lesson 7An 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.
Related to this Question
You have just purchased an annuity that pays...
Jenny Franklin estimates that as a result of...
Find the present and future values of an income...
Mr. V. Pootin has been hired to manage pension...
Kingston Development Corp. purchased a piece of...
Maintenance costs on a bridge are $6,000 every...
In comparing an ordinary annuity and an annuity...
If you start now, and make five deposits of...
An individual wants to withdraw $15,000 from...
Daniel and Jan agreed to pay $567,000 for a...
Overnight Trucking recently purchased a new...
You borrow $149,000 to buy a house. The...
How to Find the Value of an Annuity
An annuity is a type of savings account that pays back the investor in the future. Learn the formula used to calculate an annuity's value, and understand the importance of labeling specific numbers to calculate an output over time.
Annuities: Types & Benefits
Annuities are fixed amounts of money paid out on a regular basis. Learn about the definition, types, and benefits of annuities. Explore investment options, and understand the disadvantages of annuities.
Present Value of Annuity | Overview, Formula & Examples
Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.
What is a Perpetuity? - Definition & Formula
When a payment has no end date, it is called a perpetuity. Learn more about the definition of perpetuity and consider some examples. Also, learn how to calculate perpetuity, using a basic formula.
What is a Business Combination? - Definition & International Implications
A business combination involves a buyer using a transaction to take over a business. Explore the definition and the international and accounting implications of business combinations and learn about disclosure requirements.
Installment Purchases: Payment & Terms
Installment purchases allow buyers to purchase an item immediately and make payments over a period of time. Discover the terms of installment purchases, how to calculate interest on installments, and how to determine the amount of fixed or monthly payments.
Initial Value Problem & Examples | How to Solve Initial Value in Calculus
Learn to define the initial value problem and initial value formula. Learn how to solve initial value problems in calculus. See examples of initial value problems.
Independent Events Formula & Examples | What are Independent Events?
Explore independent events. Learn the definition of an independent event and see the formula to find its probability. Find various independent events examples.
Marginal Propensity to Consume Formula | How to Calculate MPC
This article covers the marginal propensity to consume, how to calculate MPC, and its relation to the marginal propensity to save and the multiplier effect.
Circular Trigonometric Functions & Examples | Understanding the Unit Circle
Learn about unit circles. Discover the circular trigonometric functions and the tangent of a unit circle, find how many radians are in a circle, and see examples.
Store of Value Overview & Examples | What is a Store of Value?
Understand the meaning of money as a store of value. Discover the functions, advantages, and disadvantages of money as a store of value.
Circular Permutation Formula & Examples | How to Solve Circular Permutation
Learn about the types of circular permutations. Discover how to solve the circular permutation formulas using factorials, and examine permutation examples.
Time Series | Analysis, Data & Applications
Learn about time series analysis and its applications, time series data, and methods and models of analysis. View an example of time series analysis.
Operations of Functions | Practice, Domain & Notation
Learn the definition of a function and function notation. Find how to carry out the four operations of functions: multiplication, division, addition, and subtraction.
What is the Difference Between Population vs Sample in Statistics? | Example of Sample & Population in Statistics
Learn what population and sample are in statistics. The importance of each is taught and then the difference between population and sample is explained.
Index Numbers in Statistics: Uses & Examples
Index numbers are used in statistics to represent changes in fields, instead of the raw data which is often difficult to read. See examples of the uses of index numbers in the stock market and the Consumer Price Index.
What Is Allowance in Accounting?
In this lesson, you will learn how the accounting profession defines the term allowance. You will also learn about common allowances used on financial statements and the two cornerstones of generally accepted accounting principles.
Solving Quadratic Equations by Completing the Square
Understand how to solve quadratic equations by completing the square. Find completing the square steps to work with fraction coefficients.
Logical Equivalence | Converse, Inverse, Contrapositive & Counterexample
A conditional statement has a converse, an inverse, and a contrapositive. Learn the examples of converses, inverses, and contrapositives that are included.
How to Solve Logarithmic & Exponential Inequalities
Learn about inequalities which contain exponents (exponential inequalities) and inequalities that contain logarithms (logarithmic inequalities). Both Logarithmic and Exponential Inequalities use one of four types of inequalities, are inverse operations, and follow a six step solution process.
Explore our homework questions and answers library
Browse
by subject