What is the present value of an annuity of 120 received at t

What is the present value of an annuity of $120 received at the end of each year for 11 years? Assume a discount rate of 7%. The first payment will be received one year from today (round to nearest $1). a. $570 b. $250 c. $400 d. $900

Solution

1-

Present value

Using present value function in MS excel

pv(rate,nper,pmt,fv,type) rate = 7% nper = 11 pmt = 120 fv= 0 type =0

PV(7%,11,120,0,0)

($900)

present value of annuity

-900

2-

Annual rate of return

Using rate function in MS excel

rate(nper,pmt,pv,fv,type)

RATE(6,250000,-1155720,0,0)

8%

1-	Present value	Using present value function in MS excel	pv(rate,nper,pmt,fv,type) rate = 7% nper = 11 pmt = 120 fv= 0 type =0	PV(7%,11,120,0,0)	($900)
		present value of annuity		-900
2-	Annual rate of return	Using rate function in MS excel	rate(nper,pmt,pv,fv,type)	RATE(6,250000,-1155720,0,0)	8%