Present Value of an Ordinary Annuity (PVOA) (cont.)
01.Core Concepts
• Sally will receive $1,500 each December 31 for 3 years. The discount rate is 5.5%. • Beginning of • Year 3: $1,500 ÷ 1.055 = $1,422 • Year 2: ($1,422 + $1,500) ÷ 1.055 = $2,770 • Year 1: ($2,770 + $1,500) ÷ 1.055 = $4,047 • Calculator: (END Mode) FV = 0, PMT = 1,500, N = 3, I/YR = 5.5 • Result: PV = –$4,047