Question

Garrett has many annuity that pays $2,460 at the beginning of each year. If the economy grows at a rate of 2.35% semiannually, what is the value of the annuity if he received it in a lump sum now rather than over a period of nine years?

Answer 1

FV value of the amount using future value annuity will be:
FV=P[(1+r)^n-1]/r
FV=2460[(1+0.01175)^18-1]/(0.01175)
FV=48,992.23

The present value of this amount will be:
PV=pe^(-rt)
PV=48992.23e^(-0.0235*9)
PV=39,652.81