The amount to be received on every month is $150 for next 15 years at an interest rate of 7.2% compounded monthly. Present value of an annuity is the current value of future payment or the present value of a series of future periodic payments made at the end of each payment period. P V Annuity = P M T [ 1 − 1 ( 1 + r ) n r ] Present value of an annuity due is the current value of future payment or the present value of a series of future periodic payments made at the beginning of each payment period. P V Annuity due = P M T [ ( 1 − 1 ( 1 + r ) n ) × ( 1 + r ) r ] Here, The present value of an annuity is “ P V Annuity ”. The periodic payments are “ PMT ”. The interest rate is “ r ”. The maturity period of number of years is “ n ”.

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Chapter 4, Problem 14PROB

Summary Introduction

The amount to be received on every month is $150 for next 15 years at an interest rate of 7.2% compounded monthly.

Present value of an annuity is the current value of future payment or the present value of a series of future periodic payments made at the end of each payment period.

PVAnnuity=PMT[1−1(1+r)nr]

Present value of an annuity due is the current value of future payment or the present value of a series of future periodic payments made at the beginning of each payment period.

PVAnnuity due=PMT[(1−1(1+r)n)×(1+r)r]

Here,

The present value of an annuity is “PVAnnuity”.

The periodic payments are “PMT”.

The interest rate is “r”.

The maturity period of number of years is “n”.

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