A series of ten $500 payments are received at the end of each year over a 10-year period. During the first two years the interest rate was 5% annual compounded monthly. During the following two years (years 3-4) the interest rate was 6% annual compounded semiannually. During the last six years (years 5-10) the interest rate was 12% compounded annually. find the present equivalent of this series of payments. Solution PV=500/(1.00416) + 500/(1.00416)^2 + 500/(1.03)^3+ 500/(1.03)^4+ 500/(1.012)^5 + 500/(1.012)^6 + 500/(1.012)^7+ 500/(1.012)^8+ 500/(1.012)^9+ 500/(1.012)^10 =4639.4.

1. A series of ten $500 payments are received at the end of each year over a 10-year period. During
the first two years the interest rate was 5% annual compounded monthly. During the following
two years (years 3-4) the interest rate was 6% annual compounded semiannually. During the last
six years (years 5-10) the interest rate was 12% compounded annually. find the present
equivalent of this series of payments.
Solution
PV=500/(1.00416) + 500/(1.00416)^2 + 500/(1.03)^3+ 500/(1.03)^4+ 500/(1.012)^5 +
500/(1.012)^6 + 500/(1.012)^7+ 500/(1.012)^8+ 500/(1.012)^9+ 500/(1.012)^10 =4639.4