present value of the annuity

Question

Suppose that an annuity will provide 20 annual payments of 1220 dollars, with the first payment coming 12 years from now. If the nominal rate of interest is 11.6 percent convertible monthly, what is the present value of the annuity?

Answer 1

First what is the present value in the future of 20 annual payments of $1220 at 11.6% interest.

N= 20

I= 11.6%

PV= ??

PMT = $1220

FV=0  

 

PV= $9,346.08  but that is 12 years from now so lets bring that back to today

 

N=12

I=  11.6%/12   I assume you meant compounded not convertable

PV=??

FV= $9,346.08

 

PV = $8,237.09