a financial company advertised on television that they will pay you $50000 now in exchange for...

a financial company advertised on television that they will pay you $50000 now in exchange for annual payments of $10000 that you are expected to receive for a legal settlement over the next 8 years. you estimate the time value of money at 12 percent.

Expert Solution

	PV of $10,000 payments	P×[1-(1÷(1+r)^n)]÷r

	Here,

1	Interest rate per annum	12.00%
2	Number of years	8
3	Number of compoundings per per annum	1
4 = 1÷3	Interest rate per period ( r)	12.00%
5 = 2×3	Number of periods (n)	8
	Payment per period (P)	$ 10,000

	PV of $10,000 payments	$ 49,676.40
		10000*[1-(1/(1+12%)^8]/12%

Finance company offer should be accepted.

jeff jeffy answered 2 years ago

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