Question

Andrea's opportunity cost rate is 12 percent compounded annually. how much must he deposit in an account today if he wants to receive $2,100 at the beginning of each of the next seven years? use the equation method to determine the amount.

Answer 1

Answer:

$9583.89

Explanation:

value of each payment (P): $2,100

interest rate per period (r): 12/100 = 0.12

number or periods (n): 7

present value of annuity (PV): ??

using the annuity formula: $PV = P * \frac{1 - (1 + r )^{-n} }{r}$

PV  =  $9583.89