RatedrillDeferred annuity
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A trust will pay $2,000 a year for 20 years, with the first payment 3 years from today. At 7.5% per year, what is the trust's payment stream worth today?
What this problem teaches
Both steps in END mode. Set P/Y = C/Y = 1, so I/Y is the rate per period. Cash you pay out is negative and cash you receive is positive.
A hint if you get stuck
Value the annuity one year before its first payment (year k), then discount that lump sum back k years.
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