Mrs. Crawford will receive $8,700 a year for the next 17 years from her trust. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. If a 13 percent interest rate is applied, what is the current value of the future payments

The current value of the future payments   = $58,543.11

Explanation:

The current value of the future payment is the present value (PV) of the of the annuity receipts of $8,700 discounted at the rate of 13% per annum.

An annuity is a series of periodic cash flows payable or receivable for certain number of years.

To determine the present value of the annuity, we use the formula below

PV = A   × (1 - (1 + r) ^(-n) )/ r

r -13%, n- 17, A = 8,700

PV = 8,700 × ( 1- (1+0.13)^( -17)/ 0.13)

PV =   8,700× 6.7290

PV =  58,543.11

The current value of the future payments   = $58,543.11

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