Jean will receive $8,500 per year for the next 15 years from her trust. If a 7% interest rate is applied, what is the current value of the future payments? Describe how you solved this problem, include which table (for example, present value and future value) was used and why.
What is the current value of the future payments?
12
Mar
capwest5a
March 12, 2010 at 4:40 am
Present value table of an annuity. You use the annuity table for cash flows coming in each year.
Look up 15 periods and 7% interest to find the factor: 9.108
Current value (present value) = $ 8,500 x 9.108 = $ 77,418
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The total amount received over the 15 years is $ 8,500 x 15 = $ 127,500