Question

4. An investment offers $10,000 per year for 20 years. If an investor can earn 6 percent annually on other investments, what is the current value of this investment

Answer 1

PV= $114,699.21

Step-by-step explanation:

Giving the following information:

Annual payment= $10,000

Number of years= 20

Interest rate= 6%

To calculate the present value, we need to use the following formula:

PV= A*{(1/i) - 1/[i*(1 + i)^n]}

A= annual payment

PV= 10,000*{(1/0.06) - 1 / [0.06*(1.06^20)]}

PV= $114,699.21