(a)Calculate the present value of an annuityof £1000 paid at the endof each year for 15 yearswith an interest rate of 2.5% per annum equivalent. (b)How much more needs to be added to the fund to make this an annuity duewith the same value (c)The annuity is to be paid continuouslyat the rate of £1000 per annum. What is the present value now?

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.