Find the area of the figure.
1 answer:
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Use present value equation.
If present value of annuity equals 400,000, then you are indifferent.
where v = 1/(1+r) and A = annual payment = 800,000/20 = 40,000
PV = 400,000
After subbing in the numbers, the equation is:
Therefore at interest rate of about 7.75% you are indifferent.
If present value of annuity equals 400,000, then you are indifferent.
where v = 1/(1+r) and A = annual payment = 800,000/20 = 40,000
PV = 400,000
After subbing in the numbers, the equation is:
Therefore at interest rate of about 7.75% you are indifferent.