I need help in solving this question below. Thanks Investment X offers to pay yo

Question

I need help in solving this question below.

Thanks

Investment X offers to pay you $5,400 per year for seven years, whereas Investment Y offers to pay you $7,500 per year for four years. Calculate the present value for Investment X and Y if the discount rate is 6 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) Present value Investment Investment Calculate the present value for Investment X and Y if the discount rate is 16 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) Present value Investment

Explanation / Answer

Present value of annuity

PV = C * [1-(1+i)^-n]/i

where

C = savings per period

i = interest rate per period

n = number of periods

a)

present value of investment X = 5400 * [1-(1+6%)^-7]/6%

= $30,144.86

present value of investment Y = 7500 * [1-(1+6%)^-4]/6%

= $25,988.29

b)

at 16% discount rate

present value of investment X = 5400 * [1-(1+16%)^-7]/16%

= $21,808.25

present value of investment Y = 7500 * [1-(1+16%)^-4]/16%

= $20986.36

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

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