A 5-year annuity of ten $6,200 semiannual payments will begin 9 years from now,

Question

A 5-year annuity of ten $6,200 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now.(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

If the discount rate is 9 percent compounded monthly, what is the value of this annuity five years from now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) AND

If the discount rate is 9 percent compounded monthly, what is the value three years from now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Please show how you got the answer!!

A 5-year annuity of ten $6,200 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now.(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Effective rate for 6 months = (1+9%/12)^6 - 1 = 4.585%

Value of the annuity 9 years from now can be calculated in Excel as =PV(4.585%,10,-6200). This is equal to 48,854.47

Value of this annuity 5 years from now = 48,854.47 / (1+4.585%)^8 = 34,130.05

Value of this annuity 3 years from now = 48,854.47 / (1+4.585%)^12 = 28,526.96

So answers are $ 34,130.05 (5 years from now) and $ 28,526.96 (3 years from now).

Hope this helped ! Let me know in case of any queries.

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