A 5-year annuity of $350 quarterly payments begins in 4 years (the first payment is at the end of the first quarter of y...
A 5-year annuity of $350 quarterly payments begins in 4 years (the first payment is at the end of the first quarter of year 4, so it's an ordinary annuity). The appropriate discount rate is 6%, compounded quarterly. What is the value of the annuity today?
$4,735.30
$4,945.94
$4,014.47
$6,009.02
Homework Answers
Option 1
At the beginning of 4 years
PV of annuity = Annuity*(1-1/(1+rate)^number of terms)/rate
= 350*(1-1/(1+6%/4)^(5*4))/ (6%/4)
=6009.02
Value of annuity now =Future value/(1+Rate)^number of periods
= 6009.02/ (1+6%/4)^(4*4)
=4735.29
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