Question

What is the value today of $4,400 per year, at a discount rate of 8.3 percent, of the first payment is received 6 years from today and the last payment is received 20 years from today

Answer 1

Present Value = $290

Step-by-step explanation:

The present value of a future payment

`PV = (FV)/((1 + r)^n)`

Where r discount rate

t is the number of years until the payment will be received.

PV = Present Value = ?

FV = Payment = $4,400

r= 8.3% = 0.083

N = 20 - 6 = 14

PV = $4400 / (1 + 0.083)(20 - 6)

= $4400 / (1.083 * 14)

= $4400 / 15.162

= $290.1992

≅ $290

Present Value = $290