An investment pays you $50,000 at the end of each of the next 20 years. The investment also pays you $1,000 at the end of each month over the same 20 year period. Assuming a discount rate of 10%, how much should you pay for this investment?
Group of answer choices
$529,303
$464,292
$610,462
$567,572
$495,048
1. 50,000 at the end of each of the next 20 years
Present Value of Annuity = Periodic Payment*[{1-(1+i)^(-n)} / i]
= 50,000*[{1-(1+10% )^(-20)} /10%]
= 425,678.186
2. $1,000 at the end of each month over the same 20 year period
Present Value of Annuity = Periodic Payment*[{1-(1+i)^(-n)} / i]
=1,000*[{1-(1+10%/12)^(-20*12)} /(10%/12)]
= 103,624.6187
Hence, Total amount to be paid today = $ 425,678.186+103,624.6187
= $ 529,302.80
= $ 529,303
Answer = $ 529,303
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