A 7-year annuity of 14 $9,200 semiannual payments will begin 10 years from now,

Question

A 7-year annuity of 14 $9,200 semiannual payments will begin 10 years from now, with the first payment coming 10.5 years from now. Requirement 1: If the discount rate is 11 percent compounded semiannually, what is the value of this annuity seven years and five years from now? (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Value of the annuity Seven years $ Five years $ Requirement 2: What is the value of the annuity today?

Explanation / Answer

Present Value of Annuity of $1 for 7 years compounded semi-annualy @11% 9.59 Annuity amount 9200 Present value of Annuity 88228 Present value of Annuity at Year 10 from now 88228 PV factor of $1 for 5 years 0.585 PV factor of $1 for 7 years 0.473 PV factor of $1 for 10 years 0.343 Value of the annuity Seven years 41693.85 Value of the annuity five years 51651.37 Value of the annuity today 30238.29

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