Investment X offers to pay you $6,000 per year for nine years, whereas Investmen

Question

Investment X offers to pay you $6,000 per year for nine years, whereas Investment Y offers to pay you $8,700 per year for five years. Calculate the present value for Investments X and Y if the discount rate is 6 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value nvestment X Investment Y Calculate the present value for Investments X and Y if the discount rate is 16 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value Investment X nvestment Y

Explanation / Answer

1.

Particulars

Present Value

Investment X

$40,810.15

Investment Y

$36,647.56

Working:

Using financial calculator BA II Plus - Input details:

X

Y

I/Y = Rate or yield / Frequency =

6.00

6.00

PMT = Payment = Payment x Frequency =

-$6,000.00

-$8,700.00

N = Total number of remaining periods = Years x Frequency =

9

5

FV = Future Value =

$0.00

$0.00

CPT > PV = Present Value =

$40,810.15

$36,647.56

2.

Particulars

Present Value

Investment X

$27,639.26

Investment Y

$28,486.35

Working:

Using financial calculator BA II Plus - Input details:

X

Y

I/Y = Rate or yield / Frequency =

16.00

16.00

PMT = Payment = Payment x Frequency =

-$6,000.00

-$8,700.00

N = Total number of remaining periods = Years x Frequency =

9

5

FV = Future Value =

$0.00

$0.00

CPT > PV = Present Value =

$27,639.26

$28,486.35

Particulars

Present Value

Investment X

$40,810.15

Investment Y

$36,647.56

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