Question

Investment X offers to pay you $5,400 per year for nine years, whereas Investment Y offers to pay you $7,700 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
Investment 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	$
Investment Y	$

Answer 1

Req a:
Investment X:
Amount annual received				5400
Multiply: Annuity PVF at 6% for 9 yrs				6.80169
Present value of investment X				36729.13
Investment Y:
Amount annual received				7700
Multiply: Annuity PVF at 6% for 5 yrs				4.21236
Present value of investment Y				32435.17
Req b:
Investment X:
Amount annual received				5400
Multiply: Annuity PVF at 16% for 9 yrs				4.60654
Present value of investment X				24875.32
Investment Y:
Amount annual received				7700
Multiply: Annuity PVF at 16% for 5 yrs				3.27429
Present value of investment Y				25212.03