SOLUTION: An investment will provide you with $100 at the end of each year for the next 10 years,What is the present value of that annuity if the discounted rate is 8% annually?
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Question 1043216: An investment will provide you with $100 at the end of each year for the next 10 years,What is the present value of that annuity if the discounted rate is 8% annually? Answer by addingup(3677) (Show Source):
You can put this solution on YOUR website! We will use the formula for Present Value of an Annuity:
P[1-{1+r)^-n}/r]
where:
P is the periodic payment = 100
r is the rate per period = 8%
-n is the number of periods = -10 (negative, your value decreases over time, so when you get the last 100 at year 10 there is no more left)
:
100[1-{1+0.08)^-10}/0.08] = 671 is your present value.
:
John
