What is the present value of a five-year annuity; with the first $3,000 payment being made three months from?
What is the present value of a five-year annuity; with the first $3,000 payment being made three months from today, if the required return is 7% EAR? How can I calculate can you show?
One piece of information is missing.
The compounding period.
I would calculate the PV 3 months from now using your EAR, then discount it back to today, using the approriate compounding.
IOW, discount the 5 cash flows back, add them together then discount them from 3 months in the future.
A financial calculator makes this almost a no-brainer, but I think you will understand the concept better if you do it manually.
Future Valve of an Annuity Section 5 3 Part 1
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