Chapter 4, Problem 23PROB

Summary Introduction

W has taken loan of $50,000 at 4.2% interest rate and need to make monthly payments for 10 years.

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.

$P{V}_{\text{Annuity}}=PMT\left[\frac{1-\frac{1}{{\left(1+r\right)}^n}}{r}\right]$

Here,

The present value of an annuity is “$P{V}_{\text{Annuity}}$”.

The periodic payments are “PMT”.

The interest rate is “r”.

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