pv tables annuity
I need help with a problem in my Personal Finance class…?
Here is the assignment question: After a protracted legal case, Joe won a settlement that will pay him $11,000 each year at the end of the year for the next ten years. If the market interest rates are currently 5%, exactly how much should the court invest today, assuming end of year payments, so there will be nothing left in the account after the final payment is made?
Here is my answer: Formula:PVA = A * PV IFA
A = PVA (n = 10, i = 5%)
PV IFA
A = 11,000 = 1,424.56 (11,000 / 7.7217 = 1,424.56)
7.7217 (provided by table in text book)
So I was wondering if I answered this question correctly. Is this what the question is asking of me or is it suppose to be a different formula. From what it sounds like to me is that this is an annuity. Can anyone tell me if this is correct please?
ZERO. The COURT doesn’t owe him anything. The DEFENDANT owes the money.
To answer the MATH question, this IS an annuity, but you used the formula incorrectly.
The answer you want is PVA = $11,000 * 7.7217 = $84,938.70.
Present Value, Future Value and Present Value and Future Value of Annuity Tables
