What's the present value of the right to receive five equal payments (ordinary annuity) of $750 per period, discounted at a rate of 12 percent per period?
PV = PMT x ((1 - (1 / (1 + r) ^ n)) / r)
= 750*((1-(1/1.12)^5)) / 0.12
PV = $2,703.58
OR
| Year | Annuity(a) | PV Factor @12%(b) | Present Value(a*b) |
| 1 | 750 | 1/(1.12^1) = 0.8929 | 669.643 |
| 2 | 750 | 1/(1.12^2) = 0.7972 | 597.895 |
| 3 | 750 | 1/(1.12^3) = 0.7118 | 533.835 |
| 4 | 750 | 1/(1.12^4) = 0.6355 | 476.639 |
| 5 | 750 | 1/(1.12^5) = 0.5674 | 425.570 |
Total 2,703.582
What's the present value of the right to receive five equal payments (ordinary annuity) of $750...