Question

(1 point) Your rich uncle bequests to you a continuous, constant income stream of $6000 per year for the next 10 years. The terms of the bequest require that this income stream be paid continuously into a specific savings account that will not be available to you for 10 years. This account earns 5.2% interest, compounded continuously. What is the present value of the bequest

Answer 1

Answer:

The present value of the bequest is:

= $45,883.70

Explanation:

a) Data and Calculations:

Constant income stream per year = $6,000

Period of investment = 10 years

Interest rate earned = 5.2% compounded continuously

From an online calculator:

N (# of periods)  10

I/Y (Interest per year)  5.2

PMT (Periodic Payment)  6000

FV (Future Value)  0

Results

PV = $45,883.70

Sum of all periodic payments $60,000.00

Total Interest $14,116.30