Engineering Board Exam Reviewer · Annuity Due and Deferred Annuity · medium
An annuity pays P20,000 at the end of each year for 6 years, with the first payment at the end of year 5. Find its present worth at 10% interest.
- P59,494.03
- P54,085.48
- P87,105.21
- P65,443.44
Answer
A. P59,494.03
Solution
Value the annuity one period before its first payment (end of year 4), then discount to time 0: PW=20,000(P/A,10%,6)(P/F,10%,4)=20,000(4.3553)(0.683013)=P59,494.03.
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