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April received an inheritance from her grandmother in the form of an annuity. The annuity pays $3,000 on January 1st from 1966 through 1984. Find the value of this annuity on January 1, 1966 using an annual effective interest rate of 5% and represent this value by an appropriate annuity symbol.

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Answer:

PV1966= $35,068.76

Explanation:

Giving the following information:

April received an inheritance from her grandmother in the form of an annuity. The annuity pays $3,000 on January 1st from 1966 through 1984.

To calculate the value of the annuity in 1966 we need to use the following formula:

PV= C*{[1-(1+i)^-n]/i}

C= periodic payment

PV= 3000*{[1-(1.05^-18)]/0.05}= $35,068.76

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