Problema Solution
Find the present value of the ordinary annuity. Please round the answer to the nearest cent.$2,000 per semiannual period for 7 yr at 12%/year compounded semiannually
Answer provided by our tutors
C = $2,000 cash flow semiannually
r = 0.12 or 12% per year
i = r/2 = 0.12/2 = 0.06 or 6% semiannual rate
t = 7 years
n = 2*7 = 14 number of payments
PV = present value
PV = C[(1 - (1 + i)^(-n))/i]
PV = 2000[(1 - (1 + 0.06)^(-14))/0.06]
PV = $18,589.97
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the present value of the ordinary annuity is $18,589.97.