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What is the present value of ten annual payments of $700,the first paid immediately and discounted at 8%,giving your answer to the nearest .
A $4697
B $1050
C $ 4435
D $ 5073I got the answer as A on my calculations so,I don’t see where I went wrong. On the mark scheme I see that one has been added to accumulated annity factor of 9 years. I also don’t understand why that one is added.
The annuity factor give the PV when the first flow is in 1 years time.
Here the first flow is ‘now’ and so the PV of that flow is $700 (i.e. $700 x 1). Afterwards the flows are for times 1 to 9 and so we use the 9 year annuity factor to get the PV of those.
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