What is the present value of $1,400 a year at a discount rate of 8 percent...

What is the present value of $1,400 a year at a discount rate of 8 percent if the first payment is received 7 years from now and you receive a total of 25 annual payments?

Question 5 options:

	$9,417.69
	$9,238.87
	$9,333.33
	$9,420.12
	$9,881.72

Solutions

Expert Solution

Calculate the present value of annuity at the end of year 6

PV at end of Year 6 = Annuity * ((1 - (1+R)^-N)/R

= 1400*((1-(1+0.08)^-25)/0.08

= 1400*10.674776

= 14944.69

Present value today = 14944.69/(1+8%)^6

= 9417.69

jeff jeffy answered 2 years ago

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