1. Find the present value of a 2-year deferred annuity at 4% interest
compounded quarterly with payments of P1,000 made every quarter for 3
years.
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1. Find the present value of a 2-year deferred annuity at 4% interest
compounded quarterly with payments of P1,000 made every quarter for 3
years.
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Answer:
This is the formula you would use to find the PV of the annuity 2 years hence.
PV=0; P=1000; R=0.04/4; N=3*4; P*(((1 + R)^N - 1)*((1 + R)^-N)* R^-1
PV =11,255.08 - this is the PV of the deferred annuity.
I assume the deferment period to be 2 years. Therefore, will bring forward the PV of the annuity to date.
PV =11,255.08 / [1 + 0.04/4]^(2*4) ] =11,255.08 / 1.0828567056280801
PV ==10,393.88 - PV of the deferred annuity to date.
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