Question

You have the ability to earn 6.30% on a series of different investment options. What would you be willing to pay for an investment that would pay you $1,000.00 per year for 11 years? Your answer should be stated as a negative number since it would be a cash outflow for you. Give your response to two decimal places.

Answer 1

Given information- interest earned on different investments= 6.30%

yearly payment received (PMT) = $1000

number of years= 11 years

Find- initial cash investment?

In this question, the kind of investment that we are looking at is an annuity for 11 years. In this investment, we have to pay an initial amount and then we will receive a series of cash flow over the years.

for finding the initial investment, we will use the data as below,

PMT= $1000, i= 6.3% or 0.063, n= 11

Hence the amount you have to pay initially is -$7,767.26