Question

An investment offers $4,350 per year for 15 years, with the first payment occurring one year from now. a.If the required return is 6 percent, what is the value of the investment

Answer 1

PV= $42,248.28

Step-by-step explanation:

Giving the following information:

Annual payment= $4,350

Number of periods= 15 years

i= 0.06

First, we need to calculate the Future Value using the following formula:

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

A= annual payment

FV= {4,350*[(1.06^15) - 1]} / 0.06

FV= 101,250.47

Now, we can determine the value (PV) of the investment:

PV= FV/(1+i)^n

PV= 101,250.47 / 1.06^15

PV= $42,248.28