Suppose you just bought an annuity with 11 annual payments of $16,100 at the current interest rate of 12.75 percent per year. What is the value of the investment at the current interest rate of 12.75 percent?
What happens to the value of your investment if interest rates suddenly drop to 7.75 percent?
What happens to the value of your investment if interest rates suddenly rise to 17.75 percent?