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- Topic: Annuity Problem
| Author | Topic: Annuity Problem |
|---|---|
| banik @2014-04-13 18:40:36 |
Two years from now, a client will receive the first of three annual payments of $20,000 from a small business project. If she can earn 9 percent annually on her investments and plans to retire in six years, how much will the three business project payments be worth at the time of her retirement? timeline is like this: beg of year 2 receives 20000 beg of year 3 receives 20000 beg of year 4 receives 20000 fv of these cash flows can be calculated for the beg of year 4 or end of year 4 which leaves 2years and 1 year in hand respectively to find the fv again at the beg of year 6. IS MY INTERPRETATION RIGHT?? |
| jon01 @2014-04-19 09:36:56 |
I believe that this should be an ordinary annuity problem, which means: timeline: end of year 1: cf1=20000 end of yr2: cf2=20000 end of yr3: cf3=20000 FV: n=2, i=9%, PV =65,562 According to the readings, unless the problem specifies that the payment is at the beginning of the year, you should assume it is an ordinary annuity. Hope this helps. |
