Growing Annuity: Example ? An annuity offers to pay $20,000 per year for 20 years and increase the annual payment by 3% each year. ? What is the present value of the annuity if the discount rate is 10 percent?
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To calculate the present value of each individual payment, we need to discount each payment back to the present value using the discount rate. The formula to calculate the present value of a future payment is: PV = FV / (1 + r)^n Where PV is the present value, Show more…
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