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Anon25 [30]
3 years ago
13

Find the present value pv of the given investment. an investment earns 2% per year and is worth $40,000 after 8 years.

Business
1 answer:
LuckyWell [14K]3 years ago
5 0
First use the formula of the future value of an annuity ordinary to find the yearly payments
Fv=pmt [(1+r)^(n)-1)÷r]
Fv future value 40000
PMT yearly payment?
R interest rate 0.02
N time 8 years
Solve the formula for PMT
PMT=Fv÷[(1+r)^(n)-1)÷r]
PMT=40,000÷(((1+0.02)^(8)−1)
÷(0.02))
=4,660.39

Now use the formula of the present value of an annuity ordinary to find the present value
Pv=pmt [(1-(1+r)^(-n))÷r]
PV present value?
PMT yearly payments 4660.39
R interest rate 0.02
N time 8 years
Pv=4,660.39×((1−(1+0.02)^(−8))÷(0.02))
pv=34,139.60. ....answer
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