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Gabriel has an annuity that pays $1,310 at the beginning of each year. If the economy grows at a rate of 1.95% quarterly, what is the value of the annuity if he received it in a lump sum now rather than over a period of eight years?

Answer :

carlosego
For this case we have the following expression:
 P (t) = P * (1 + r / n) ^ (n * t)
 Where,
 P: initial amount
 r: interest
 n: periods
 t: time in years
 Substituting values we have:
 P (8) = 1310 * (1 + 0.0195 / 4) ^ (4 * 8)
 P (8) = $ 1530.58
 Answer:
 the value of the annuity is:
 P (8) = $ 1530.58

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