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Fantom [35]
3 years ago
10

P=$150(1-1/1.03)^10/0.03

Business
1 answer:
Anarel [89]3 years ago
7 0

Answer: b. the present value is halved

Explanation:

The present value of the investment is based on several things including the future payments. If these payments were to be halved from $150 to $75, the entire present value would be halved as well.

Present Value= 150 * (( 1 - (1 / 1.03) ) ^10) / 0.03

= $1,279.53

Present Value = 75 *  (( 1 - (1 / 1.03) ) ^10) / 0.03

= $639.77

<em>Notice how the present value when the payments are $75 is half that of the present value at $150.</em>

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