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What are the steps to this question: What uniform annual payment for 30 years is equivalent...

What are the steps to this question:

What uniform annual payment for 30 years is equivalent to spending $10,000 immediately, $10,000 at the end of 10 years, $10,000 at the end of 20 years, and $2,000 a year for 30 years? Assume an interest rate of 9%. (Ans. $3,558.22)

Solutions

Expert Solution

First, calculate the present value of all spendings.

Present value formula,

Present value of spending $10,000 at 0 year, 10 year and 20 year is calculated below:

The present value of spending $2,000 a year for 30 years can be calculated with the help of present value of annuity formula,

The total present value of spending is $16,008.41697 + $20,547.30809 = $36,555.72506.

The uniform annual payment which is equal to these spending is calculated below:

jeff jeffy answered 2 years ago
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