An investment offers $9,200 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 12 percent. a. What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value be if the payments occurred for 42 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the value be if the payments occurred for 77 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What would the value be if the payments occurred forever? (Do not round
An investment offers $9,200 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 12 percent. a. What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value be if the payments occurred for 42 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the value be if the payments occurred for 77 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What would the value be if the payments occurred forever? (Do not round
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 16P
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Question
An investment offers $9,200 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 12 percent. |
|
a. |
What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What would the value be if the payments occurred for 42 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
c. | What would the value be if the payments occurred for 77 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
d. | What would the value be if the payments occurred forever? (Do not round |
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STEP 1
Given a specific rate of return or discount rate, an annuity's present value (PV) is the current worth of its expected future payments.
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