10 year annuity of 20 - $8900. Semiannual payments will begin 11 years from now,

Question

10 year annuity of 20 - $8900. Semiannual payments will begin 11 years from now, with the first payment coming 11.5 years from now. If the discount rate is 8 percent compounded semiannually, what is the value of this annuity 10 years from now? 8 years from now? 10 year annuity of 20 - $8900. Semiannual payments will begin 11 years from now, with the first payment coming 11.5 years from now. If the discount rate is 8 percent compounded semiannually, what is the value of this annuity 10 years from now? 8 years from now?

Explanation / Answer

Particular Year Annuity of 8900 11-30 PV of an annuity due=A*((F-1)/(r*F))(1+r) F=(1+0.04)^30 3.243 PV Year 0 with n=30 , =8900*((3.243-1)/(0.04*3.243))*(1.04) (A) 160046.3 F=(1+0.04)^10 1.480 PV Year 0 with n=10, =8900*((1.48-1)/(0.04*1.48))*(1.04) (B) 75048.65 Present Value of the annuty at 10years=A-B 84997.67 Present Value of the annuty at 8years=84997/(1.08^2) 72871.23

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