At the end of seven years, when you graduate from college, your father has promi

Question

At the end of seven years, when you graduate from college, your father has promised to give you a used car that will cost $22,000. Click here to view Exhibit 11B-1. To determine the appropriate discount factor using tables. Required: What lump sum must he invest now to have the $22,000 at the end of seven years if he can invest money at ten percent? (Round discount factor to 3 decimal places, intermediate and final answer to the nearest dollar amount.) Present value what lump sum must he invest now to have the $22,000 at the end of seven years if he can invest money at twelve percent? (Round discount factor to 3 decimal places, intermediate and final answer to the nearest dollar amount.) Present value

Explanation / Answer

Solution:

1-b

1-b

Lumpsum amount to be invested $ x PVAF @ 10 % for 7 years 0.5132 Present value 0.5132x 0.5132 x = 22,000 x = 42,868.28

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