Flood damage in a typicalyear is given according to the table below. Determine t

Question

Flood damage in a typicalyear is given according to the table below. Determine the mostlikely present worth of flood damage over the next 10-year periodif the effective annual interest rate is 7 % Value of flood damage Probability $0 0.75 $10,000 0.19 $20,000 0.03 $30,000 0.03 Please show formulas so I understand how to dothe problem Flood damage in a typicalyear is given according to the table below. Determine the mostlikely present worth of flood damage over the next 10-year periodif the effective annual interest rate is 7 % Value of flood damage Probability $0 0.75 $10,000 0.19 $20,000 0.03 $30,000 0.03 Please show formulas so I understand how to dothe problem Value of flood damage Probability $0 0.75 $10,000 0.19 $20,000 0.03 $30,000 0.03 Please show formulas so I understand how to dothe problem Value of flood damage Probability $0 0.75 $10,000 0.19 $20,000 0.03 $30,000 0.03

Explanation / Answer

First, take the expected value of one year which is thefollowing: (0 x .75) + (10,000 x .19) + (20,000 x .03) + (30,000 x .03) =$3,400. If you want the present value over 10 years, treat it as anannuity. The first year is (3,400)/(1.07), second year is(3,400)/(1.07)2... and so forth. If you have a financialcalculator, enter 7 for your interest, $3,400 for your payment, 10for your N, and calculate present value.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.