1. Given a 6 percent interest rate, compute the present value of payments made i

Question

1. Given a 6 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of $1,150, $1,350, $1,350, and $1,650. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

2. What’s the interest rate of a 9-year, annual $3,300 annuity with present value of $20,000? (Round your answer to 2 decimal places.)

2. What’s the interest rate of a 9-year, annual $3,300 annuity with present value of $20,000? (Round your answer to 2 decimal places.)

Explanation / Answer

1.Present value is

1150 / (1.06) +1350/1.06^2 + 1350/1.06^3 + 1650/1.06^4 =1084.9 + 1201.49 +1133.48 +1306.95

=4726.82$

2.PV 20000

Coupon 3300

N 9

FV is 0

Yield is 8.73%

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