Problem:
I just bought a 10 year ordinary annuity that promises to pay 1,500 at the end of each next 10 years. If the appropriate interest rate for this annuity is 7.8% what is the present value of this annuity?
If I want to extend my annuity another ten years, if I pay more money today, I can continue to receive $1,500 per year for another 10 years. How much more should I be willing to pay to extend my annuity?
How much will my annuity be worth if it paid 1,500 at the end of each year forever?