Question

Sasha has an investment worth 51,078 dollars. The investment will make a special payment of X to Sasha in 3 years from today. The investment also will make regular, fixed annual payments of 8,300 dollars to Sasha with the first of these payments made to Sasha later today and the last of these annual payments made to Sasha in 6 years from today. The expected return for the investment is 8.46 percent per year. What is X, the amount of the special payment that will be made to Sasha in 3 years?

Answer 1

Cost of Investment = $51,078
Expected Return = 8.46%
Annual Cash Flow = $8,300
Special cash flow in year 3 is $X

$51,078 = $8,300 + $8,300/1.0846 + $8,300/1.0846^2 + $8,300/1.0846^3 + $8,300/1.0846^4 + $8,300/1.0846^5 + $8,300/1.0846^6 + $X/1.0846^3
$51,078 = $8,300 * 1.0846 * (1 - (1/1.0846)^7) / 0.0846 + $X / 1.0846^3
$51,078 = $8,300 * 5.55907 + $X * 0.78377
$51,078 = $46,140.281 + $X * 0.78377
$4,937.719 = $X * 0.78377
$X = $6,299.96

So, special payment made to Sasha in 3 years is $6,299.96 or $6,300

answered by: anonymous