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trapecia [35]
3 years ago
7

Your grandfather has promised to give you​ $500 a year at the end of each of the next four years if you earn Cs or better in all

of your courses each year. Using a discount rate of​ 7%, which of the following is correct for determining the present value of the​ gift?
a. PV = $500x7%x4
b. PV = $500x(PV factor, i=4%, n =7)
c. PV = $500x(Annuity PV factor, i=7%, n=4)
d. PV = $500x(Annuity PV factor, i=7%, n=4)
Business
2 answers:
aleksandr82 [10.1K]3 years ago
7 0

Answer:

d. PV = $500x(Annuity PV factor, i=7%, n=4)

Explanation:

A fix Payment for a specified period of time is called annuity. The discounting of these payment on a specified rate is known as present value of annuity.

Formula for Present value of annuity is as follow

PV of annuity = P x Present value factor

PV of annuity = P x [ ( 1- ( 1+ i )^-n ) / i ]

As discount rate is 7%, so

i = 7%

Number of payments is 4

n = 4

Bezzdna [24]3 years ago
5 0

Answer:

The correct answer is option (d) PV = $500x(Annuity PV factor, i=7%, n=4)

Explanation:

Given data;

P = $500

rate (r) = 7%

years (n)= 4

The present value of goods is determined using the formula;

PV of annuity = P x Annuity present value factor----------------1

But,

<h3>Annuity present value factor =  [1-(1+i)⁻ⁿ)]/i ------------2</h3>

Putting equation 2 into equation 2, we have

PV of annuity = P x Annuity present value factor

<h3>PV of annuity = P * [1-(1+i)⁻ⁿ)]/i -----------------------3</h3>

where;

PV = present value

i = rate

n = number of years

P = price

To calculate PV using equation 3, option (d) is the appropriate option

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Answer:

A change in quantity demanded is caused by a change in price only. That is, when price rises quantity demanded falls vise versa

A change in demand occurs when there is a shift in the demand caused by a change in other determinates of demand other than price such as change in income, change in taste and fashion, demographic changes etc.

Explanation:

Real word example of change in demand :

Changing Tastes or Preferences

From 1990 to 2020, the per-person consumption of chicken by Americans rose from 48 pounds per year to 85 pounds per year, and consumption of beef fell from 77 pounds per year to 54 pounds per year, according to the U.S. Department of Agriculture (USDA). Changes like these are largely due to movements in taste, which change the quantity of a good demanded at every price: that is, they shift the demand curve for that good, rightward for chicken and leftward for beef.

Simply put it this way> Change in quantity demanded : Price change, quantity demanded change

Change in Demand: Price doesn't change but quantity demanded changes as a result of change in other determinates of demand examples the change in preference

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