Personal Finance 1st Edition by Jack R. Kapoor

Exercise 28

Calculating the Present Value of a Series. Pete Morton is planning to go to graduate school in a program of study that will take three years. Pete wants to have $15,000 available each year for various school and living expenses. If he earns 4 percent on his money, how much must be deposited at the start of his studies to be able to withdraw $15,000 a year for three years?

Step 1 of 2

Compute the present value of annuity:

The present value of annuity is the discounted value of the future cash flows at the required rate of return.

The formula for present value of annuity is