Q: What amount should you invest now if you want to receive payments of $3000 at the end of each year for 10 years with the receipt of the first payment 4 years from now? Assume that the money earns 5% compounded annually.
I have the answer (20,010.97) but when I am calculating the simple ordinary Annuity: p/y: 1, c/y= 1, n=10, i/y= 5, pmt= 3000, fv=0 and compute FV which is (-23165.20479)
now I have to get the deferred annuity so I have to change n to 3 even though the first payments are 4 years. I just need an explanation of why this is so.
I have the answer (20,010.97) but when I am calculating the simple ordinary Annuity: p/y: 1, c/y= 1, n=10, i/y= 5, pmt= 3000, fv=0 and compute FV which is (-23165.20479)
now I have to get the deferred annuity so I have to change n to 3 even though the first payments are 4 years. I just need an explanation of why this is so.