Answer:
The answer would be, $21,760
Explanation:
The formula to be used is that of calculating the present value (PV) of the payment in the ordinary annuity (PMT). PMT are done annually, semi-annually, quarterly or monthly.
PV = PMT * ((1-(1/ (1+r) n))/r)
Where PV is the present value; PMT is the payment in an ordinary annuity; r is the opportunity cost rate; n is the number of years
in this case, PV= 3,200; r=10%, and n=12
To get PV, substitute the values given above and compute as shown below:
PV = 3,200*((1-(1/(1+0.10)12))/0.10)
PV= $21,760
With an opportunity cost of 10% compounded annually, Lisa will have to deposit $21,760 today if she wants to be receiving $3,200 at the end of each year for the next 12 years.
