Nancy Billows promised to pay her son $600 quarterly for 4 years. If Nancy can i

Question

Nancy Billows promised to pay her son $600 quarterly for 4 years. If Nancy can invest her money at 8 percent in an ordinary annuity, Nancy must invest how much today? (Use the tables in the handbook.)

Is 16 periods correct at 8% interest? If so the table rate for present value of an annuity is 8.8514%. Do I take $600.00 x 8.8514= 5310.84? Is that right?

I don't want to write out the entire table so if you can tell me the periods and the rate which I know is 8% I can tell you the table rate.

Explanation / Answer

no since interest rate per period = 8%/4 = 2%

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

= 600 * [1- (1+0.02)^-16]/0.02

= 600 *13.5777

= 8146 .62

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