You will receive 27 annual payments of $22,500. The first payment will be received 7 years...

You will receive 27 annual payments of $22,500. The first payment will be received 7 years from today and the interest rate is 5.1 percent. What is the value of the payments today?

$228,447.53

$359,870.96

$249,948.47

$230,148.07

$241,885.62

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Expert Solution

Calculation of value of the payments today:

Year	Cashflow($)(a)	[email protected]%(b)	Present value(a*b)
1	0	0.951	0.00
2	0	0.905	0.00
3	0	0.861	0.00
4	0	0.820	0.00
5	0	0.780	0.00
6	0	0.742	0.00
7	22500	0.706	15884.13
8	22500	0.672	15113.35
9	22500	0.639	14379.97
10	22500	0.608	13682.18
11	22500	0.579	13018.25
12	22500	0.551	12386.54
13	22500	0.524	11785.48
14	22500	0.498	11213.59
15	22500	0.474	10669.44
16	22500	0.451	10151.71
17	22500	0.429	9659.09
18	22500	0.408	9190.38
19	22500	0.389	8744.42
20	22500	0.370	8320.09
21	22500	0.352	7916.36
22	22500	0.335	7532.22
23	22500	0.319	7166.71
24	22500	0.303	6818.95
25	22500	0.288	6488.06
26	22500	0.274	6173.22
27	22500	0.261	5873.67
28	22500	0.248	5588.64
29	22500	0.236	5317.45
30	22500	0.225	5059.42
31	22500	0.214	4813.91
32	22500	0.204	4580.32
33	22500	0.194	4358.06
Present value			241885.62

Therefore the value of payments today is $241885.62

jeff jeffy answered 1 year ago

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