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30 March, 18:59

You will receive 27 annual payments of $22,500. The first payment will be received 7 years from today and the interest rate is 5.1 percent. What is the value of the payments today?

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  1. 30 March, 22:50
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    PV = $230,148.09

    Explanation:

    Giving the following information:

    You will receive 27 annual payments of $22,500. The first payment will be received 7 years from today and the interest rate is 5.1 percent.

    First, we need to calculate the final value of the payments. We need to use the following formula:

    FV = {A*[ (1+i) ^n-1]}/i

    A = annual pay = 22,500

    n = 27

    i = 0.051

    FV = {22,500*[ (1.051^27) - 1]} / 0.051

    FV = $1,248,819.52

    Now, we can calculate the present value:

    PV = FV / (1+i) ^n

    PV = 1,248,819.52 / (1.051^34)

    PV = $230,148.09
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