# Present Value

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1. Consider an ordinary annuity whereby an investor is paid £1000 at the end of each year for 10 years. What is the present value of the annuity if annual interest rate is 6% per year?

Is this just 1000(1.06)^10 = 1790.85?
2. Surely if the investor is paid £1000 a year for a decade the annuity is going to be worth more than £1790.85?

My result £7360.09: £1000[1 - (1 + 0.06) ^ -10]/(0.06) .

My result £7360.09: £1000[1 - (1 + 0.06) ^ -10]/(0.06) .
I got the exact same answer. But said answer would be different if maybe OP left out some aspect of the equation, like maybe, for example, if there is quarterly compounding

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Updated: August 10, 2016
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