Question

Let’s suppose that we wish for an annuity to be set up so that we can take out $6000 every quarter for 15 years and this annuity will get 6% interest compounded quarterly...how much must we invest today for this to happen?
Use the Present Value formula

P = C/r (1-(1+r)^-n)
= 6000/(.06/4) (1-(1+.06/4)^(-4*15))
= 236,281.61

Quite a discount from the $360,000 cash stream.

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