TVM 57 - Present Value of an Ordinary Annuity

Audio Transcript

How much must be deposited on January 1, 2019 in a savings account paying 5.5% annually in order to make annual withdrawals of $40,000 at the end of the years 2019 and 2020?

Compute the present value of an ordinary annuity

Enter the known variables.

The payment, PMT, is -$40,000.

The rate is 5.5%.

The number of periods, NPER, is 2.

We go to the Formulas tab and look for the PV function.

We click on PMT,

We click on rate,

We click on NPER.

Click OK

The present value, PV, is $73,853