12. Present value of annuities Aa Aa You have a partnership stake in a business

Question

12. Present value of annuities Aa Aa You have a partnership stake in a business that pays you equal payments of $1,000 at the end of each year for the next seven years. If the annual interest rate stays constant at 4%, what is the value of these payments in today's dollars? Round your answer to the nearest whole dollar. O $5,102 o $6,002 o $6,242 O $%7,503 You found out that now you are going to receive payments of $5,000 for the next 16 years. You will receive these payments at the beginning of each year. The annual interest rate will remain constant at 12%, what is the present value of these payments? Round your answer to the nearest whole dollar. $39,054 O $52,72:3 O $34,870 O $31,243 Flash Player WIN 31,0,0,108

Explanation / Answer

12 Present value factor of an annuity of $1(i=4%,n=7) = 6.002. The PV factor can be calculated manually as (1-(1.04)^-7)/0.04 Value of these payments today = 1000*6.002 = $6002 2 Present value factor of an annuity due of $1(i=12%,n=16) = 7.8109. The PV factor can be calculated manually as 1+ (1-(1.12)^-15)/0.12 Value of these payments today = 5000*7.8109 = $39054

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