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A 12 year annual annuity of Rs. 10000 will begin 8 years hence (the first payment occurs at the end of 8 years). What is the present value of this annuity if the discount rate is 14 percent?
Suggested Answer: B
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24 comments · newest first
KR
Krissy
2 days ago
A seems high. What’s your rationale?
DO
Domingo
7 days ago
I’m leaning towards A) Rs. 22898.12.
KA
Kaitlyn
12 days ago
Because the present value calculation seems to fit.
JO
Johna
17 days ago
Why B?
KA
Kaitlyn
23 days ago
I think it's B) Rs. 22620.63.
RO
Roy
28 days ago
I agree, the timing of the annuity is confusing.
IN
Inocencia
1 month ago
This question is tricky.
VI
Vincenza
1 month ago
Just focus on the steps. We got this!
GA
Gail
1 month ago
I practiced a lot, but still nervous!
CA
Carissa
2 months ago
Same here! Timing is everything in these problems.
SI
Silvana
2 months ago
I just hope I remember the formula!
VI
Vincenza
2 months ago
I’m leaning towards B. It feels right with the discount rate.
GA
Gail
2 months ago
I think it's A. The calculations seem to fit.
CA
Carissa
2 months ago
Yeah, the annuity part is confusing.
SI
Silvana
2 months ago
This question is tricky!
RO
Rory
3 months ago
I thought annuities were more complicated than this!
GL
Glory
3 months ago
14% is a solid discount rate for this scenario.
LU
Lucina
3 months ago
Wait, how can it be that high? Seems off.
WE
Wei
3 months ago
I think it's definitely option A, looks right to me!
HY
Hyman
3 months ago
The present value calculation involves discounting future cash flows.
CE
Cecilia
4 months ago
I feel like the answer should be close to Rs. 22,000 based on what we practiced, but I can't remember the exact calculations we did.
BE
Benton
4 months ago
I’m a bit confused about when to apply the discount rate. Is it just for the 12 payments or do we discount the whole thing back to the present?
MI
Mitsue
4 months ago
I think we need to find the present value of the annuity first and then discount it back to today. The 14% rate is pretty high, though!
TO
Tonette
4 months ago
I remember we did a similar problem in class about calculating present value for an annuity, but I’m not sure about the exact formula to use here.