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Talja [164]
3 years ago
9

Lisa's opportunity cost rate is 10 percent compounded annually. How much must she deposit in an account today if she wants to re

ceive $3,200 at the end of each of the next 12 years? Use the equation method to determine the amount to be deposited today.
Business
1 answer:
Goryan [66]3 years ago
8 0

Answer:

Present value = $21,804 (approx)

Explanation:

Given:

Periodic payment = $3,200

Number of period = 12

Interest rate = 10% = 10/100 = 0.1

Present value = ?

Computation of Present value:

Present\ value = PMT[\frac{1-(1+r)^{-n}}{r} ]\\\\Present\ value = 3,200[\frac{1-(1+0.1)^{-12}}{0.1} ]\\\\Present\ value = 3,200[\frac{1-(1.1)^{-12}}{0.1} ]\\\\Present\ value = 3,200[\frac{1-0.318630818}{0.1} ]\\\\Present\ value = 3,200[\frac{0.681369182}{0.1} ]\\\\Present\ value = 21,803.6188

Present value = $21,804 (approx)

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