Calculate the present value of an annuity

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Reference no: EM131620973

Suppose the spot rates of interest for investment horizons of 1 to 5 years are 4.5%, and for 6 to 10 years are 3%.

(a) Calculate the present value of an annuity-due of $500 over 10 years.

(b) Assuming future payments earn the spot rates of interest as at time 0, compute the future value of the annuity in (a) at the end of year 10.

Reference no: EM131620973

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