An investment offers $9,200 per year for 17 years, with the first payment occurr
ID: 2617827 • Letter: A
Question
An investment offers $9,200 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 12 percent.
What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
What would the value be if the payments occurred for 42 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
What would the value be if the payments occurred for 77 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
What would the value be if the payments occurred forever? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
Explanation / Answer
An investment offers $9,200 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 12 percent.
What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
Using financial calculator BA II Plus - Input details:
17 years
I/Y = Yield = Rate =
12.00
FV = Future Value =
$0
N = Number of payments =
17
PMT = Payments =
-$9,200.00
CPT > PV = Present Value =
$65,500.60
What would the value be if the payments occurred for 42 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
Using financial calculator BA II Plus - Input details:
42 years
I/Y = Yield = Rate =
12.00
FV = Future Value =
$0
N = Number of payments =
42
PMT = Payments =
-$9,200.00
CPT > PV = Present Value =
$76,009.84
What would the value be if the payments occurred for 77 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
Using financial calculator BA II Plus - Input details:
77 years
I/Y = Yield = Rate =
12.00
FV = Future Value =
$0
N = Number of payments =
77
PMT = Payments =
-$9,200.00
CPT > PV = Present Value =
$76,654.23
What would the value be if the payments occurred forever? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
PV for payment occurring forever’s formula:
PV = Payment / Rate = 9200/12% = $76,666.67
Using financial calculator BA II Plus - Input details:
17 years
I/Y = Yield = Rate =
12.00
FV = Future Value =
$0
N = Number of payments =
17
PMT = Payments =
-$9,200.00
CPT > PV = Present Value =
$65,500.60
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.