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2 years ago

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What is the present value of $1,400 a year at a discount rate of 8 percent if the first payment is received 7 years from now and

you receive a total of 25 annual payments

1 answer:

valentinak56 [21]2 years ago

5 0

Answer:

Present Value = $9,417.69 (Approx)

Explanation:

Given:

Annual payment = $1,400

Total payments = 25

Rate = 8% = 0.08

Computation:

First payment [7 years from now ]

So,

Present Value = $1,400(1/1.08⁶)[1 - (1/1.08)²⁵] / 0.08

Present Value = $1,400[6.72692]

Present Value = $9,417.69 (Approx)

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<em>See attachment for the budget line equation</em>

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<em>See attachment for point R</em>

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