Peter Lynchpin wants to sell you an investment contract that pays equal $13,900

Question

Peter Lynchpin wants to sell you an investment contract that pays equal $13,900 amounts at the end of each year for the next 15 years. If you require an effective annual return of 10 percent on this investment, how much will you pay for the contract today? (Do not round intermediate calculations and round your answer to 2 decimal places) Peter Lynchpin wants to sell you an investment contract that pays equal $13,900 amounts at the end of each year for the next 15 years. If you require an effective annual return of 10 percent on this investment, how much will you pay for the contract today? (Do not round intermediate calculations and round your answer to 2 decimal places) Peter Lynchpin wants to sell you an investment contract that pays equal $13,900 amounts at the end of each year for the next 15 years. If you require an effective annual return of 10 percent on this investment, how much will you pay for the contract today? (Do not round intermediate calculations and round your answer to 2 decimal places) Peter Lynchpin wants to sell you an investment contract that pays equal $13,900 amounts at the end of each year for the next 15 years. If you require an effective annual return of 10 percent on this investment, how much will you pay for the contract today? (Do not round intermediate calculations and round your answer to 2 decimal places)

Explanation / Answer

Contract price today P×[1-(1÷(1+r)^n)]÷r Here, 1 Interest rate per annum 10.00% 2 Number of years                                                             15 3 Number of compoundings per per annum                                                               1 4 = 1÷3 Interest rate per period ( r) 10.00% 5 = 2×3 Number of periods (n) 15 Payment per period (P) $                                                13,900 Contract price today $                                      1,05,724.51 13900*[1-(1/(1+10%)^15]/10%

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