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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

Future value = Periodic payment*(1-(1+r/n)^-n*t/r/n)

Periodic payment = 500

Rate of interest (r) = 8%

Maturity (t) = 2 years

Compounding periods (n) = 4

Future value = 500*(1-(1+0.08/4)^-2*4/0.08/4)

= 500*(1-(1.02)^-8/0.02)

= 500*(1-0.85349/0.02)

=500*(0.1465/0.02)

= 500*7.3254

= 3662.7

Answer : 3662.74

jeff jeffy answered 3 years ago
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