Question

Leann will receive $ 95,000 a year for 7 years, starting today. If the rate of return is 6.8 percent, what are these payments worth today? a. $564,009.27 b. $515,571.80 c. $518,571.80 d. $531,019.80 e. $550,630.68

Answer 1

The payments are worth $564,009.27 today.

Step-by-step explanation:

To find the worth of the payments today, we need to calculate the present value of an annuity. The formula to calculate the present value of an annuity is:

Present Value = Payment × (1 - (1 + Rate of return)-n) / Rate of return

Using this formula, and plugging in the given values, we get:

Present Value = $95,000 × (1 - (1 + 0.068)-7) / 0.068 = $564,009.27

Therefore, the payments are worth $564,009.27 today.

Answer 2

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