You are scheduled to receive annual payments of $11,200 for each of the next 20

Question

You are scheduled to receive annual payments of $11,200 for each of the next 20 years. Your discount rate is 11 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather then the end of each year?
-$10,232 -$10,948 -$9,811 -$11,200 -$12,432 You are scheduled to receive annual payments of $11,200 for each of the next 20 years. Your discount rate is 11 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather then the end of each year?
-$10,232 -$10,948 -$9,811 -$11,200 -$12,432
-$10,232 -$10,948 -$9,811 -$11,200 -$12,432

Explanation / Answer

present value of oridinary annuity = 11200 * [1-(1+11%)^-20]/11% = 89189.28

present value of annuity due = 11200 * [1-(1+11%)^-20]/11% * (1+11%)

diference = 9811

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