Question

Payments of $400,000 will begin in 3 years, repeating every 6

years for a total of 20 payments. What is the present value today,
assuming simple annual interest of 8% compounded quaterly every 3
month

Answer 1

The present value of the payments is $4,443,588.40.

Step-by-step explanation:

To calculate the present value of the payments, we need to use the formula for present value of an annuity. The formula is PV = P * (1 - (1 + r)^(-n)) / r, where PV is the present value, P is the payment amount, r is the interest rate per period, and n is the number of periods. In this case, the payment amount is $400,000, the interest rate is 8% compounded quarterly, and the number of periods is 20. Plugging the values into the formula, we get:

PV = 400,000 * (1 - (1 + 0.08/4)^(-20)) / (0.08/4) = $4,443,588.40

Therefore, the present value of the payments is $4,443,588.40.