What is the value of x?

Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of

MA_775_DIABLO [31]

To answer this question, we can assume some different possibilities for the answer, since it is incomplete (or with not clear options):

a. $\\ \frac{PMT}{r}$

b. $\\ PMT*\frac{(1+r)^{n}-1}{r}*(1 + r)$

c. $\\ PMT*\frac{(1+r)^{n} - 1}{r}$

Answer:

a. $\\ PV_{perpetuity}=\frac{PMT}{r}$

Step-by-step explanation:

The present value of a perpetuity is an amount of money needed to invest today to have a perpetuity, or an annuity paid for life, considering an interest rate of r.

PMT is a finance term for payment and r is the interest rate (roughly, an important quantity that defines how much it can be obtained for an investment).

In general, the present value can be mathematically defined as:

$\\ PV(r) = \frac{PMT_{0}}{(1+r)^{0}} + \frac{PMT_{1}}{(1+r)^{1}} + \frac{PMT_{2}}{(1+r)^{2}}+\dotsc+\frac{PMT_{n}}{(1+r)^{n}}$

Where n represents the number of periods for the investment.

On the other hand, an annuity, given a present value PV, is defined by:

$\\ PMT= A = PV*(1+r)^{n}*(\frac{r}{(1+r)^{n}-1})$

Solving this equation for PV (present value) to define the present value of an annuity, we have:

$\\ PV = \frac{(1+r)^{n}-1}{(r*(1+r)^{n})}*PMT$

But the question is asking for an annuity paid for life (theoretically, for infinite periods of time); then, if we calculate the limit for the previous equation when n tends to infinity, we find that:

$\\ lim_{n\to\infty} \frac{(1+r)^{n}-1}{(r*(1+r)^{n})}*PMT$

$\\ (lim_{n\to\infty} \frac{(1+r)^{n}}{r*(1+r)^{n}} - lim_{n\to\infty} \frac{1}{r*(1+r)^{n}})*PMT$

$\\ (lim_{n\to\infty} \frac{(1+r)^{n}}{(1+r)^{n}}*\frac{1}{r} - lim_{n\to\infty} \frac{1}{r*(1+r)^{n}})*PMT$

$\\ (lim_{n\to\infty} 1*\frac{1}{r} - lim_{n\to\infty} \frac{1}{r*(1+r)^{n}})*PMT$

The second term of the previous expression tends to 0 (zero) when n tends to infinity, then:

$\\ (lim_{n\to\infty} 1*\frac{1}{r})*PMT$

$\\ (1*\frac{1}{r})*PMT$

$\\ \frac{PMT}{r}$ or

$\\ PV_{perpetuity}=\frac{PMT}{r}$

This expression represents that, with an interest of r, if we make an investment of PMT today, then we will have an annuity of $\\ \frac{PMT}{r}$ for life, because in each period PMT would be the same again due to the interest rate (r).

6 0

4 years ago

Solve for s: -7 = 8 + (-13)

Sholpan [36]

-7 = -5 is the answer

3 0

4 years ago

9 - x = 6; x = 15 6x = 24; x = 6 35 = 5x; x = 7 x + 10 = 21; x = 31 which one is right

ycow [4]

Answer:

35 = 5x ; x = 7

Step-by-step explanation:

plug 7 in for x

35 = 5(7)

35 = 35

hope this helps!!!

6 0

3 years ago

Read 2 more answers

How would I write #3

Rainbow [258]

Yes, if you know that every 1 quart is equal to 4 cups then the ratio is 1:4. To find out how many cups are in 9 quarts, multiply both sides of the ration by 9. The answer would be 9:36, so there are 36 cups in 9 quarts.

7 0

3 years ago

Read 2 more answers

Plzzzz HELP ASAP IMAGE ABOVE THXXXX^^

romanna [79]

Answer:

9

Step-by-step explanation:

3*6 would be 18 for a rectangle.

the triangle is basically a rectangle cut in half diagonally, so it's (3*6)/2

8 0

3 years ago