Annuity Exercise Strictly Confidential

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Annuity Exercise
You are about to purchase a 5 year annuity yielding a 12% return. We receive an annual payment of
$15,000 in our annuity. What is the present value, or price, of this annuity?

Answers

Require Rate of return 12%

Time FV DF PV
1 $15,000 0.8929 $13,393
2 $15,000 0.7972 $11,958
3 $15,000 0.7118 $10,677
4 $15,000 0.6355 $9,533
5 $15,000 0.5674 $8,511
3.6048 $54,072

$75,000
an annual payment of