Question

# An investment offers \$6,300 per year, with the first payment occurring one year from now. The...

 An investment offers \$6,300 per year, with the first payment occurring one year from now. The required return is 5 percent.
 a. What would the value be today if the payments occurred for 10 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value be today if the payments occurred for 35 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the value be today if the payments occurred for 65 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What would the value be today if the payments occurred forever? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
 a. Present value of 10 annual payments b. Present value of 35 annual payments c. Present value of 65 annual payments d. Present value of annual payments forever

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

=\$6300[1-(1.05)^-10]/0.05

=\$6300*7.721734929

=\$48646.93(Approx).

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

=\$6300[1-(1.05)^-35]/0.05

=\$6300*16.37419429

=\$103,157.42(Approx).

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

=\$6300[1-(1.05)^-65]/0.05

=\$6300*19.16107033

=\$120,714.74(Approx).

d.Present value of perpetuity=Annual cash flows/required rate

=(6300/0.05)

=\$126,000

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