What is the present value of an ordinary annuity that pays $150 for 3 years when the interest rate is 2%/year?

Answer 1

There are 3 cash flows, for the ordinary annuity:

Year 1: PV_1 = 150 / ( 1 + 2% ) = 147.0588

Year 2: PV_2 = 150 / ( 1 + 2% )^2 = 144.1753

Year 3: PV_3 = 150 / ( 1 + 2% )^3 = 141.3484

PV of Annuity Due = PV_1 + PV_2 + PV_3 = 147.0588 + 144.1753 + 141.3484 = $432.5825