A 4-year annuity of eight $6,200 semiannual payments will begin 6 years from now, with the first payment coming 6.5 years from now.If the discount rate is 7 percent, compounded semiannually, what is the value of this annuity 4 years from now?

Question

Quizplus · Accepted Answer

The correct answer is A because the value of the annuity 4 years from now is $37,139.58. This can be calculated using the formula for the present value of an annuity, which is:PV = PMT * [1 - (1 + r)^-n] / rwhere:PV is the present value of the annuityPMT is the amount of each paymentr is the discount raten is the number of paymentsIn this case, the PMT is $6,200, the r is 7%, and the n is 8. Plugging these values into the formula, we get:PV = $6,200 * [1 - (1 + 0.07)^-8] / 0.07PV = $37,139.58

A 4-Year Annuity of Eight $6,200 Semiannual Payments Will Begin