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A 15-year annuity pays $2,220 per month, and payments are made at the beginning of each month. If the interest rate is 10 percent compounded monthly for the first six years, and 6 percent compounded monthly thereafter, what is the present value of the annuity?

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The present value of the annuity is $304,744.04.

What is an annuity?

An annuity is a periodic fixed amount of money that is received periodically.

An annuity is usually a long-term insurance product that provides guaranteed income.

Formula for Present Value of Annuity:

PV = P \times \frac{1 - (1 + r)^{-n}}{r}

PV = present value of an ordinary annuity

P = value of each payment

r = interest rate per period

n = number of periods

Data and Calculations:

N (# of periods) = 72 (12 x 6)

I/Y (Interest per year) = 10%

PMT (Periodic Payment) = $2,220

FV (Future Value) = $0

Results:

PV for 6 years = $119,832.64

Sum of all periodic payments $159,840.00

Total Interest $-40,007.36

PV for 9 years = $184,911.40

Sum of all periodic payments = $239,760 ($2,220 x 108)

Total Interest $54,848.6

Total PV for 15 years = $304,744.04 ($119,832.64 + $184,911.40)

Thus, the present value of the annuity is $304,744.04.

Learn more about the Present Value of an Annuity at https://brainly.com/question/25792915

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