Investment X offers to pay you $4,600 per year for nine years, whereas Investmen

Question

Investment X offers to pay you $4,600 per year for nine years, whereas Investment Y offers to pay you $6,700 per year for six years.

Calculate the present value for Investment X and Y if the discount rate is 4 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Calculate the present value for Investment X and Y if the discount rate is 14 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Investment X offers to pay you $4,600 per year for nine years, whereas Investment Y offers to pay you $6,700 per year for six years.

Explanation / Answer

A. Investment X 4% Year Investment Discount rate (Investement/ (1+r)^n) 1 4600 4423.077 2 4600 4252.959 3 4600 4089.383 4 4600 3932.099 5 4600 3780.865 6 4600 3635.447 7 4600 3495.622 8 4600 3361.175 9 4600 3231.899 Present value 34202.53 Investment Y 4% Year Investment Discount rate (Investement/ (1+r)^n) 1 6700 6442.308 2 6700 6194.527 3 6700 5956.276 4 6700 5727.188 5 6700 5506.912 6 6700 5295.107 Present value 35122.32 B. Investment X 14% Year Investment Discount rate (Investement/ (1+r)^n) 1 4600 4035.087719 2 4600 3539.550631 3 4600 3104.868975 4 4600 2723.569276 5 4600 2389.095856 6 4600 2095.698119 7 4600 1838.331684 8 4600 1612.571652 9 4600 1414.536537 Present value 22753.31045 Investment Y 14% Year Investment Discount rate (Investement/ (1+r)^n) 1 6700 5877.192982 2 6700 5155.432441 3 6700 4522.309159 4 6700 3966.937858 5 6700 3479.770051 6 6700 3052.429869 Present value 26054.07236

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