An easy payment plan offered to by a local electronics store for your new audio

ID: 1189891 • Letter: A

Question

An easy payment plan offered to by a local electronics store for your new audio system calls for payments of $2000,$2500,$3000, and $3500 at the ends of years 1through 4, respectively. Your money is well invested and earns a consistent 10 percent per year.
1.What is the percent worth of these payments?
2. If you prefer to make equal annual payments having the same present worth, how much would they be? An easy payment plan offered to by a local electronics store for your new audio system calls for payments of $2000,$2500,$3000, and $3500 at the ends of years 1through 4, respectively. Your money is well invested and earns a consistent 10 percent per year.
1.What is the percent worth of these payments?
2. If you prefer to make equal annual payments having the same present worth, how much would they be? An easy payment plan offered to by a local electronics store for your new audio system calls for payments of $2000,$2500,$3000, and $3500 at the ends of years 1through 4, respectively. Your money is well invested and earns a consistent 10 percent per year.
1.What is the percent worth of these payments?
2. If you prefer to make equal annual payments having the same present worth, how much would they be?

Explanation / Answer

Year

Cash Flow

PV factor 10%

2000

0.909091

1818.182

2500

0.826446

2066.116

3000

0.751315

2253.944

3500

0.683013

2390.547

8528.79

We have:

R= 10%

N= 4

PV= 8528.79

PVIFA(10%,4) =3.170

Equal annual payment = PV/ PVIFA(R%,n)

=8528.79 / 3.170

= 2690.47

hence equal annual payment would be 2690.47 per year.