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A rich aunt has promised you $ 3 comma 000$3,000 one year from today. In​ addition, each year after​ that, she has promised you a payment​ (on the anniversary of the last​ payment) that is 7 %7% larger
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A rich aunt has promised you $ 3 comma 000$3,000 one year from today. In​ addition, each year after​ that, she has promised you a payment​ (on the anniversary of the last​ payment) that is 7 %7% larger than the last payment. She will continue to show this generosity for 2020 ​years, giving a total of 2020 payments. If the interest rate is 7 %7%​, what is her promise worth​ today?

User Dhinesh
by
5.8k points

1 Answer

7 votes

Answer:

$42,857.14

Step-by-step explanation:

Payment received every year (PMT): $3000

Rate: 7%

Number of payment (NPer): 2020

Her promise worth today is the present value (PV) of the payment received annually

We can use excel to calculate PV as in this formula PV(rate,NPER,-PMT)

=PV(7%,2020,-3000)

=$42,857.14

User Farktronix
by
4.7k points
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