To calculate: The present value.
Introduction:
An
Answer to Problem 6QP
a) The present value for the
b) The present value for the annuity payment of $1,095 which is given for 9 years at an interest rate of 7% is $7,134.18.
c) The present value for the annuity payment of $11,000 which is given for 18 years at an interest rate of 9% is $96,311.88.
d) The present value for the annuity payment of $30,000 which is given for 28 years at an interest rate of 11% is $258,048.65.
Explanation of Solution
Given information:
The details of
The annuity payment of $1,095 is given for 9 years at a rate of 7%. The timeline is as follows:
The payment of $11,000 is given for 18 years at a rate of 9%. The timeline is as follows:
The payment of $30,000 is given for 28 years at a rate of 11%. The timeline is as follows:
Formula to calculate the present value annuity:
Note: C denotes the annuity payment or an annual cash flow, r denotes the rate of exchange, and t denotes the period.
Compute the present value annuity for $2,100 at 8%:
Hence, the present value annuity is $10,933.38.
Compute the present value annuity for $1,095 at 7%:
Hence, the present value annuity is $7,134.18.
Compute the present value annuity for $11,000 at 9%:
Hence, the present value annuity is $96,311.88.
Compute the present value annuity for $30,000 at 11%:
Hence, the present value annuity is $258,048.65.
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Chapter 5 Solutions
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