If the required return is 6 percent, what is the value of the investment today?
ID: 2757336 • Letter: I
Question
If the required return is 6 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 today be if the payments occurred for 40 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value =
What would the value today be if the payments occurred for 75 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value =
What would the value today 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 =
An investment offers $5,600 per year for 15 years, with the first payment occurring one year from now.If the required return is 6 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 today be if the payments occurred for 40 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value =
What would the value today be if the payments occurred for 75 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value =
What would the value today 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
Present value of annuity = P×[1-(1÷(1+r)^n)]÷r
r is interest rate per period
P is payment per period
n is number of payments
= $5,600×[1-(1÷(1+6%)^15)]÷6%
= $54,388.59
= $5,600×[1-(1÷(1+6%)^40)]÷6%
= $84,259.26
= $5,600×[1-(1÷(1+6%)^75)]÷6%
= $92,152.75
Forever:
= $5,600/6%
= $93,333.33