A real estate investor feels that the cash flow from a property will enable her to...

A real estate investor feels that the cash flow from a property will enable her to pay a lender $18,000 per year, at the end of every year, for 10 years. How much should the lender be willing to loan her if he requires a 9% annual interest rate (annually compounded, assuming the first of the 10 equal payment arrives one year from the date the loan is disbursed)

The answer was 115,517.83

Can you show the work. Thanks

Expert Solution

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=18000[1-(1.09)^-10]/0.09

=18000*6.4176577

which is equal to

=$115517.83(Approx).

jeff jeffy answered 2 years ago

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