Annuity Payment N Years Away Confusion!
“An investor wants to receive $10,000 annually for ten years with the first payment five years from today. If the investor can earn a 14% annual return, the amount that she will have to invest today is closest to:”
I know how to solve the question, Enter PMT = 10,000, N = 10, and I = 14. Compute PV = 52,161.16. That is the present value of the 10-year annuity, four years from today. But per Schweser, “Next, we need to discount that back to present for four years to find the amount of the investment today. Enter FV = −52,161.16, N = 4, I = 14, PMT = 0. Compute PV = 30,883.59.”
If the first payment is five years from today, why is N=4 and not N=5?
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