Suppose you just bought a 15-year annuity of $7,700 per year at the current interest rate...

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Suppose you just bought a 15-year annuity of $7,700 per year atthe current interest rate of 11 percent per year. What is the valueof your annuity today? (Do not round intermediate calculations andround your answer to 2 decimal places, e.g., 32.16.)
Present value $ ?
What happens to the value of your investment if interest ratessuddenly drop to 6 percent? (Do not round intermediate calculationsand round your answer to 2 decimal places, e.g., 32.16.) Presentvalue $?
What if interest rates suddenly rise to 16 percent? (Do notround intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)
Present Value $ ?

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4.1 Ratings (635 Votes)

Present value of annuity is the present worth of cash flows that is to be received in the future if future value is known rate of interest in r and time is n then PV of annuity is PV of annuity P1 1 rn r 77001 1 01115 011 77001 11115 011 77001 See Answer

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Suppose you just bought a 15-year annuity of $7,700 per year atthe current interest rate of 11 percent per year. What is the valueof your annuity today? (Do not round intermediate calculations andround your answer to 2 decimal places, e.g., 32.16.)Present value $ ?What happens to the value of your investment if interest ratessuddenly drop to 6 percent? (Do not round intermediate calculationsand round your answer to 2 decimal places, e.g., 32.16.) Presentvalue $?What if interest rates suddenly rise to 16 percent? (Do notround intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)Present Value $ ?