Final answer:
To calculate the present value of future payments, we can use the formula for the present value of an annuity. The formula is PV = PMT x [(1 - (1 + r)^-n) / r]. In this case, Leann will receive $95,000 a year for 7 years with a 6.8 percent interest rate. The payments are worth $564,009.27 today.
Step-by-step explanation:
To calculate the present value of future payments, we can use the formula for the present value of an annuity. The formula is:
PV = PMT x [(1 - (1 + r)^-n) / r]
Where:
- PV is the present value
- PMT is the payment amount
- r is the interest rate
- n is the number of periods
In this case, Leann will receive $95,000 a year for 7 years. The rate of return is 6.8 percent. Plugging these values into the formula, we get:
PV = $95,000 x [(1 - (1 + 0.068)^-7) / 0.068] = $564,009.27
Therefore, the payments are worth $564,009.27 today. Therefore, the correct answer is a. $564,009.27