Question

What is the value today of a money machine that will pay $3,043.00 every six months for 22.00 years? Assume the first payment is made 3.00 years from today and the interest rate is 8.00%.

please show work or show how to answer using a BA II Plus calculator

Answer 1

First, we need to find the value in 3 years, for that, we need to put the following values in the financial calculator:

N = 22*2 = 44; I/Y = 8/2 = 4; PMT = -3043; FV = 0;

Press CPT, then PV, which gives us 62,530.12

So, value in 3 years = $62,530.12

Now, we can find the value today, for that, we need to put the following values in the financial calculator:

N = 3*2 = 6; I/Y = 8/2 = 4; PMT = 0; FV = 62,530.12;

Press CPT, then PV, which gives us -49,418.47

So, value in 3 years = $49,418.47