Answered

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An investment offers $5,700 per year, with the first payment occurring one year from now. The required return is 5 percent. a. What would the value be today if the payments occurred for 10 years

Sagot :

Cricetus

Answer:

The correct answer is "$44,013.89".

Explanation:

Given:

Investment per year,

= $5,700

Required return,

= 5%

As we know,

⇒ [tex]Present \ value=Investment \ per \ year\times Annuity \ factor[/tex]

Or,

⇒ [tex]Annuity \ factor=\frac{1-[\frac{1}{(1+k)}]^n }{k}[/tex]

then,

The present value of 10 annual payment will be:

= [tex]5700\times \frac{1-[\frac{1}{(1+.05)}]^{10} }{.05}[/tex]

= [tex]44013.89[/tex] ($)

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