You have a partnership stake in a business that pays you equal payments of $3,50
ID: 2617416 • Letter: Y
Question
You have a partnership stake in a business that pays you equal payments of $3,500 at the end of each year for the next ten years. If the annual interest rate stays constant at 9%, what is the value of these payments in today’s dollars? (Note: Round your answer to the nearest whole dollar.)
$24,484
$19,093
$22,462
$28,078
You found out that now you are going to receive payments of $7,000 for the next 11 years. You will receive these payments at the beginning of each year. The annual interest rate will remain constant at 11%. What is the present value of these payments? (Note: Round your answer to the nearest whole dollar.)
$65,104
$48,225
$43,446
$38,580
Explanation / Answer
Question - 1
The Answer is “ $22,462 “
Present Value of the Annual Payment = Annual Payments x Present Value Annuity Factor
= $3,500 x [ PVIFA 9%, 10 Year ]
= $3,500 x 6.4176577
= $22,462
The value of these payments in today’s dollars = $22,462
Question - 2
The Answer is “$48,225 “
The present value = $7,000 x [ (PVIFA 11%, 10 Year) + 1 ]
= $7,000 x [5.889232 + 1 ]
= $7,000 x 6.889232
= “$48,225
The present value of these payments = $48,225
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