a. What is the present value of nine annual cash payments of $6,000, to be paid
ID: 2379129 • Letter: A
Question
a. What is the present value of nine annual cash payments of $6,000, to be paid at the end of each year using an interest rate of 4%?
b. What is the present value of $20,000 to be paid at the end of 23 years, using an interest rate of 16%?
c. How much cash must be deposited in a savings account as a single amount in order to accumulate $300,000 at the end of 12 years, assuming that the account will earn 8% interest?
d. How much cash must be deposited in a savings account (as a single amount) in order to accumulate $50,000 at the end of 12 years, assuming that the account will earn 14% interest?
Explanation / Answer
(a) PV = $ 6000 * [(1.04^-1) + (1.04^-2) + ....+ (1.04^-9)] = $ 44,611.99
(b) PV = $ 20000 * [1.16^(-23)] = $ 658.41
(c) A = p*[(1+r)^n] or P = A*[(1+r)^(-n)] = 300000*(1.08)^(-12) = $ 119,134.13
(d) A = p*[(1+r)^n] or P = A*[(1+r)^(-n)] = 50000*(1.14)^(-12) = $ 10,377.96
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.