Time Value of Money Help- Accounting

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

A. How much must be invested on January 1, 2014 to receive $20,000 for ten years if the first payment is to be taken on January 1, 2024? Assume an annual interest rate of 6%?

Apr 28th, 2015

NPV of the annuity on 1/1/2024 is 156,034 (annuity due)

This will be the future value in 10 years.

The present value is 87,128. This is what must be invested. 

Apr 28th, 2015

Hi! can you explain to me how you got the value of $156,034

Apr 29th, 2015

That is the value of the annuity immediately before the first payment. 

You can use a calculator to calculate the pv at that point

Rate=6%

Periods=10

Pmt=20,000

http://www.investopedia.com/calculator/pvannuitydue.aspx

Apr 29th, 2015

Whenever I put that in my calculator the PV always equals 147,202... is the problem my calculator?

Apr 30th, 2015

If it's a BA-2+, it calculates it as an ordinary annuity. Try finding (rate 6%, periods =9, pmt=20,000) and add 20,000, which would be an annuity due

Apr 30th, 2015

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Apr 28th, 2015
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Apr 28th, 2015
Jun 26th, 2017
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