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Kevin Morales invests $20,479.30 now for a series of $3,800 annual returns beginning one year from...

Kevin Morales invests $20,479.30 now for a series of $3,800 annual returns beginning one year from now. Kevin will earn a return of 7% on the initial investment.

How many annual payments of $3,800 will Kevin receive?

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Answer #1

Answer

Present Value= $20,479.3

Annual Payments = $3,800

Rate of Return = 7%

Present Value Annuity Factor = Present Value / Annual Payments

= $20,479.3 / $3,800

Present Value Annuity Factor (PVAF) = 5.389289

So the PVAF @7% is 5.389289. We need to check PVAF table and see what year at interest rate 7%, PVAF is 5.389289.

= 7th Year

At 7th Year PVAF @7% is 5.389

So Kevin will receive Annual Payments for 7 Years

Dear Student, if u have any query, plz feel free to reach me.

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