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  3. 5.) you will receive $500 today and every month fo

5.) You will receive $500 today and every month for the next 20 years. You...

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5.) You will receive $500 today and every month for the next 20 years. You will receive this payment at the beginning of the month. Assume you can earn 5% on this annuity. (a) How much is it worth? (2 points) PV of Annuity Due=A*[(1-(1+r)^-n)/r]*(1+r) =500*[(1-(1+.05/12)^-240)/(.05/12)]*(1+.05/12) -500*[(1-0.36864452885)/(0.00416666666)]*(1+0.00416666666) =500*((0.63135547115)/(0.00416666666)]*(1.00416666666) 500*151525313318*1.0041666666676,078.33 (b) What is the value if the annuity pays at the end of the month? (2 points)

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