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algol13
3 years ago
11

An investment offers $6,400 per year for 15 years, with the first payment occurring one year from now. If the required return is

6 percent, what is the value of the investment
Business
1 answer:
yawa3891 [41]3 years ago
4 0

Answer:

PV= $62,158.4

Explanation:

Giving the following information:

Annual payment= $6,400

Number of periods= 15 years

Interest rate= 6% = 0.06

<u>First, we need to calculate the future value using the following formula:</u>

FV= {A*[(1+i)^n-1]}/i

A= annual payment

FV= {6,400*[(1.06^15) - 1]} / 0.06

FV= $148,966.21

<u>Now, the present value:</u>

PV= FV/(1+i)^n

PV= 148,966.21 / (1.06^15)

PV= $62,158.4

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