Question

# An investment offers \$4,800 per year for 19 years, with the first payment occurring one year...

An investment offers \$4,800 per year for 19 years, with the first payment occurring one year from now. If the required return is 11 percent, the present value of the investment is \$  . If the payments occurred for 31 years, the present value of the investment would be \$  . If the payments occurred for 81 years, the present value of the investment would be \$  . If the payments last forever, the present value would be \$  (Do not include the dollar signs (\$). Round your answers to 2 decimal places. (e.g., 32.16))

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

1.Present value=\$4800[1-(1.11)^-19]/0.11

=\$4800*7.83929421

which is equal to

=\$37628.61(Approx).

2.Present value=\$4800[1-(1.11)^-31]/0.11

=\$4800*8.733146463

which is equal to

=\$41919.10(Approx).

3.Present value=\$4800[1-(1.11)^-81]/0.11

=\$4800*9.088970679

which is equal to

=\$43627.06(Approx).

4.Present value of perpetuity=Annual inflows/interest rate

=\$4800/0.11

which is equal to

=\$43,636.36(Approx).

#### Earn Coins

Coins can be redeemed for fabulous gifts.