Question

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

Answer 1

The correct answer is "$44,013.89".

Step-by-step explanation:

Given:

Investment per year,

= $5,700

Required return,

= 5%

As we know,

⇒
`Present \ value=Investment \ per \ year* Annuity \ factor`

Or,

⇒
`Annuity \ factor=(1-[(1)/((1+k))]^n )/(k)`

then,

The present value of 10 annual payment will be:

=
`5700* (1-[(1)/((1+.05))]^(10) )/(.05)`

=
`44013.89` ($)