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%?
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.
Hi! can you explain to me how you got the value of $156,034
That is the value of the annuity immediately before the first payment.
You can use a calculator to calculate the pv at that point
Whenever I put that in my calculator the PV always equals 147,202... is the problem my calculator?
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
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