Answer:
answered
Explanation:
What is the value of an investment that pays $22,000 every other year forever, if the first payment occurs one year from today and the discount rate is 15 percent compounded daily?
Effective 2 year rate = (1+ 15%/365)^(365*2) - 1 = 34.9776%
Effective Annual Rate = (1+ 15%/365)^365 - 1
Effective Annual Rate = 16.1798%
Value of Investment at year 1 = 22000 + 22000/34.97756%
Value of Investment at year 1 = 84,897.577
Present Value of Investment = 84897.577/(1+16.179844%)
Present Value of Investment = $ 494,169.661
Part B:
What is the value today if the first payment occurs four years from today?
Value of Investment at year 4 = 22000 + 22000/34.97756%
Value of Investment at year 4 = 84897.577
Present Value of Investment = 84897.577/(1+16.179844%)^4
Present Value of Investment = $ 46,598.52217