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An investment will pay $150 at the end of each of the next 3 years, $100 at the end of Year 4, $400 at the end of Year 5, and $450 at the end of Year 6. If other investments of equal risk earn 9 percent annually, What is its present value?

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facundobuzzetti

Answer:

Present Value= $978.83

Explanation:

Giving the following information:

An investment will pay $150 at the end of each of the next 3 years, $100 at the end of Year 4, $400 at the end of Year 5, and $450 at the end of Year 6.

i= 0.09

We need to use the following formula:

PV= FV/(1+i)^n

For example:

Year 1= 150 / 1.09= 137.61

Year 4= 100/1.09^4= 70.84

Year 6= 450/1.09^6= 268.32

PV= 978.83

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