you are comparing two annuities with equal present values. the applicable discou

Question

you are comparing two annuities with equal present values. the applicable discount rate is 7.5%. one annuity pays $5000 on the first day of each year for twenty years. How much does the send annuity pay each year for twenty years if it pays at the end of each year? you are comparing two annuities with equal present values. the applicable discount rate is 7.5%. one annuity pays $5000 on the first day of each year for twenty years. How much does the send annuity pay each year for twenty years if it pays at the end of each year?

Explanation / Answer

PV = 5000+5000PVIFA(7.5%,19)

= 5000+(5000x9.9591)

= $54795.39

54795.39= XPVIFA(7.5%,20)

X= 54795.39/10.1945

= $5374.99 or $5375

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