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A real estate partnership predicts it will pay $500 at the end of each quarter to...

A real estate partnership predicts it will pay $500 at the end of each quarter to its partners for the next two years. Assume the partners earn an 8% return compounded quarterly on their investment, how much should they pay for the investment?

1656.06

4223.98

3662.74

3235.99

Solutions

Expert Solution

Given

Payment each quarter (PMT) = $500

Annual Rate = 8%

Rate per quarter (I/Y) = 2% per quarter (i.e. 8%/4)

No of quarters = 8 (i.e. 2 years *4)

How much they should pay for the investment is the Present Value of the cash flows of $500 per quarter

In the calculator-

Input PMT=$500, I/Y=2%, N=8 & FV=0

Then CPT PV to get the answer as $3662.74

jeff jeffy answered 2 years ago
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