You buy an annuity which will pay you $12,000 a year for ten years. The payments are paid on the first day of each year. What is the value of this annuity today at a 7% discount rate?

PV of annuity due = $90,182.8 (Approx.)

Explanation:

Given:

Payment per year = $12,000

Number of year = 10

Interest rate = 7% = 0.07

Find:

PV of annuity due

Computation:

PV of annuity due = P + P[{1-(1+r)⁻⁽ⁿ⁻¹)/r]

PV of annuity due = 12,000 + 12,000[{1-(1+0.07)⁻⁽¹⁰⁻¹)/0.07]

PV of annuity due = $90,182.8 (Approx.)

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough