Answer:
Current value of contract is $214,142.50
Explanation:
A fix payment for a specific period starting today is called advance annuity. It is discounted on a given rate to calculate present value of annuity.
Present value of annuity is calculated by following formula.
PV of annuity = C [ ( 1 - ( 1 + r )^-(n-1) ) / r ]
PV of annuity = $50,000 [ ( 1 - ( 1 + 0.084 )^-(5-1) ) / 0.084 ]
PV of annuity = $50,000 [ ( 1 - ( 1 + 0.084 )^-4 ) / 0.084 ]
PV of annuity = $214,142.50
