Question

Jose has the opportunity to invest in a scheme which will pay $5000 at the end of each of the next 5 years. He must invest $10,000 at the start of the first year and an additional $10,000 at the end of the first year. What is the present value of this investment if the interest rate is 8%?

Answer 1

Answer: $19963.6

Step-by-step explanation:

The present value of this investment if the interest rate is 8% would be gotten by using the formula below;

PV = PMT/[r × (1+r)^n / (1+r)^n -1]

PV = 5000[8% × (1+8%)^5 / (1+8%)^5-1

PV = 5000[0.08 + 1.08^5 / 1.08^4

PV = 19963.6

Therefore, the present value of the investment is 19963.6