Gabriel has an annuity that pays $1,310 at the beginning of each year. If the economy grows at a rate of 1.95% quarterly, what is the value of the annuity if he received it in a lump sum now rather than over a period of eight years?
For this case we have the following expression: P (t) = P * (1 + r / n) ^ (n * t) Where, P: initial amount r: interest n: periods t: time in years Substituting values we have: P (8) = 1310 * (1 + 0.0195 / 4) ^ (4 * 8) P (8) = $ 1530.58 Answer: the value of the annuity is: P (8) = $ 1530.58
