Use the table below to answer the following question: Assumption: Required effec

Question

Use the table below to answer the following question: Assumption: Required effective annual rate of return is 8.0%. If the investment pays S5.000 at the beginning of each 6-month period (starting with the initial investment date) for 3 years what would the present value be? Select one $23.814 $26.277 $27.308 $24,750 Use the table below to answer the following question: Assumption: Required effective annual rate of return is 8.0%. What would the present value be if the investment pays you $30,000 at the end of 3 years? Select one: $24,750 $27,308 $26,277 $23.814

Explanation / Answer

1. In case of beginning installment pvaf is calculated as.

1+ (total years - 1), for beginning year time , pvf = 1

And for halfyearly period,time is doubled and rate is halved.

Accordingly present value = 5000 × (pvaf for 5years + 1)

= using the table, 5000 × 1+ 4.4615(4%, 5th year)

= $27308

2. Present value = future value /(1+ rate)n

30000 /(1 +8%) 3

= 30000 × .7938 (Using table)

=$23814

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

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