SOLUTION: Suppose that an annuity will provide for 20 annual payments of 1260 dollars, with the first payment coming 9 years from now. If the nominal rate of interest is 8.6 percent converti
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Question 1201532: Suppose that an annuity will provide for 20 annual payments of 1260 dollars, with the first payment coming 9 years from now. If the nominal rate of interest is 8.6 percent convertible monthly, what is the present value of the annuity? Answer by Theo(13342) (Show Source):
You can put this solution on YOUR website! the present value of the annuity is 5816.73, rounded to the nearest penny.
the 20 annual payments have a present value in the 8th year of 11545.36.
that is then brought to the present having a present value of 5816.73.
the interest rate is 8.6% compounded monthly to be equal to an effective interest rate of (1 + .086/12) ^ 12 = 1.089472134 - 1 = .089472134 * 100 = 8.9472134%.
here's what the cash flow and present value looks like in excel.
