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Studentka2010 [4]
2 years ago
14

For tax reasons, your client wishes to purchase an annuity that pays $100,000 each year for 6 years, with the first payment in o

ne year. At an interest rate of 7% and focusing on time value of money without consideration of any fees, how much would the client need to invest now
Business
1 answer:
Ne4ueva [31]2 years ago
5 0

Answer:

the  amount that should be invested now is $476,654

Explanation:

The computation of the amount that should be invested now is shown below:

= Payment made each year × (1 - (1 + rate of interest)^-number of years) ÷ rate of interest

= $100,000 × [1 - (1 + 7%)^-6] ÷  7%

= $476,654

hence, the  amount that should be invested now is $476,654

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if the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the presen
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