Question

What is the value today of a money machine that will pay $3,809.00 every six months for 21.00 years? Assume the first payment is made six months from today and the interest rate is 15.00%.

Answer 1

Answer:

The present value machine = $48351.13

Explanation:

Given the annuity amount = $3809

Total number of years for which the annuity is made = 21 years

The annuity is made every six months.

Interest rate = 15%

We have to find the present value of machine by using the above information. Here, below is the calculation.

The present value machine = Annuity × (1-1/(1+rate)^number of terms)/ rate

The present value machine = 3809*(1-1/(1+15%/2)^(21*2))/(15%/2)

The present value machine = $48351.13