Please answer the following and show all work. An investment pays $5,000 per yea
ID: 2771646 • Letter: P
Question
Please answer the following and show all work. An investment pays $5,000 per year for the next 10 years. If your discount rate is 7%, how much are you willing to pay for this investment toda y? You want to purchase a new car, and you are willing to pay 530.000. If you can invest at 5% per year and you currently have 515.000, how long will it be before you have enough money to pay cash for the car? Suppose you begin saving for your retirement by depositing $3,000 per year in an IRA. If the annual interest rate is 6.5%, how much will you have in 40 years? Suppose you invest $500 today in an account paying 2% interest per year. How much will you have in the account in 5 years?Explanation / Answer
Present value of annuity = P×[1-(1÷(1+r)^n))]÷r
= $5000×[1-(1÷(1+7%)^10))]÷7%
Maximum payment, P= $35,117.90
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