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. |

Present value | |

Investment X | $ |

Investment Y | $ |

Calculate the present value for Investments X and Y if the
discount rate is 16 percent. |

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 | ||||

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