An investment offers $3,527 per year for 18 years, with the first payment occurring 1 year...

An investment offers $3,527 per year for 18 years, with the first payment occurring 1 year from now. If the required return is 4 percent, what is the value of the investment?

Expert Solution

Givne about an investment,

It offers PMT = $3527 at each year end for next t = 18 years

required return r = 4%

So, value of investment can be calculated using PV formula of annuity,

PV = PMT*(1 - (1+r)^-t)/r = 3527*(1 - 1.04^-18)/0.04 = $44649.34

So, value of investment is $44649.34

jeff jeffy answered 2 years ago

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