Question

What is the present value of a four-year annuity of $100 per year that makes its first payment 2 years from today if the discount rate is 9

Answer 1

$297.22

Step-by-step explanation:

Present value is the sum of discounted cash flows

present value can be calculated using a financial calculator

Cash flow in year 1 = 0

Cash flow each year from year 2 to 5 = 100

I = 9%

Present value = $297.22

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute