Answer: The present value of the given annuity is $ 11040.13.
Explanation:
To calculate the present value for a given annuity, we use the equation:
[tex]PV=PMT\times \frac{(1-(\frac{1}{1+r^n}))}{r}[/tex]
where,
PV = present value
PMT = fixed annuity amount = $1500
r = rate of interest = 6 % = 0.06
n = time period = 10 years
Putting values in above equation, we get:
[tex]PV=\$ 1500\times \frac{(1-(\frac{1}{1+0.06^{10}}))}{0.06}\\\\PV=\$ 1500\times \frac{(1-(\frac{1}{1.06^{10}}))}{0.06}\\\\ PV=\$ 1500\times 7.36\\\\ PV=\$ 11040.13[/tex]
Hence, the present value of the given annuity is $ 11040.13.
