Engineering Board Exam Reviewer · Annuity Due and Deferred Annuity · hard
A deferred annuity of P4,000 per year for 5 years is to begin at the end of year 3. Find its present value (at time 0) at 6% annual interest.
- P14,997.20
- P16,849.47
- P15,500.00
- P14,000.00
Answer
A. P14,997.20
Solution
First find the value one period before the first payment (end of year 2): PV2=4000· 1-(1.06)-50.06 16,849.47. Discounting back 2 more years: PV0=16849.47/(1.06)2 P14,997.20.
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