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FrozenT [24]
3 years ago
13

Jude wants to receive $1,100 at the beginning of each of the next eight years. If his opportunity cost rate is 9 percent compoun

ded annually, how much must he deposit in an account today? Use a financial calculator to make the calculation.
Business
1 answer:
alukav5142 [94]3 years ago
3 0

Answer:

$6,636.25

Explanation:

The amount which will be deposited by the Jude today in order to receive the $1,100 in the beginning of each of next eight years shall be determined through present value of annuity formula, which is given as follow:

Amount to be deposited today=R+R[(1-(1+i)^n-1)/i]

Where

R=amount to be received at start of year=$1,100

i=interest rate compounded annually=9%

n=number of years involved=8

Amount to be deposited today=1,100+1,100[(1-(1+9%)^7/9%]

                                                   =$6,636.25

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Explanation:

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