Asked by cthj

Please answer these questions:
A. After a protracted legal case, Joe won a settlement that will pay him $11,000 each year at the end of the year for the next ten years. If the market interest rates are currently 5%, exactly how much should the court invest today, assuming end of year payments, so there will be nothing left in the account after the final payment is made?


So I think I need to add them all up seperatly(annually), but do I multiply 11,000 by the 5% ?

Answered by Anonymous
You would have to multiply 11,000(1+i)^x for each year. Where i is the interest rate and x is how many years are remaining.
11,000(1.05)^9
11,000(1.05)^8
11,000(1.05)^7
etc., then add the values to find the value of annuity.