Homework Answers
Present value of an ordinary annuity
Here, we’ve Annual Payment (P) = $19,000 per year
Annual interest rate (r) = 10.00% per year
Number of years (n) = 5 Years
Therefore, the Present Value of an Ordinary Annuity = P x [{1 - (1 / (1 + r) n} / r]
= $19,000 x [{1 - (1 / (1 + 0.10)5} / 0.10]
= $19,000 x [{1 - (1 / 1.610510)} / 0.10]
= $19,000 x [{1 - 0.620921} / 0.10]
= $19,000 x [0.379079 / 0.10]
= $19,000 x 3.791
= $72,029
“Hence, the Present Value of the annuity will be $72,029”
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