Answer:
PV= $163,714.68
Explanation:
Giving the following information:
A series of payments grow by 10% per year over 5 years. The starting value is $50,000 at the end of year 1. The interest rate is 6%.
The easiest way is to include the growing rate in the interest rate, therefore:
Interest rate= 16%
First, we need to calculate the final value of the annuity and then the present value:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit= 50,000
i= 0.16
n= 5
FV= {50,000*[(1.16^5)-1]}/0.16= $343,856.77
Now, we can calculate the present value:
PV= FV/(1+i)^n
PV= 343,856.77/1.16^5= $163,714.68
