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22 September, 01:15

You are purchasing a used car and will make 5 annual payments of $3,500 starting one year from today. If your funds could be invested at 9%, what is the present value of the car? (Round the final answer to the nearest dollar.

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  1. 22 September, 01:39
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    The Present Value (PV) of the car is $13,614

    Explanation:

    Computing the Present Value of the car using the excel formula of Present Value which is as:

    =PV (rate, nper, PMT, fv, type)

    where

    rate is 9%

    nper is number of years is 5

    PMT is annual payments which is of - $3,500

    FV is Future value which is not given

    Type is 0

    Putting the values above:

    =PV (9%,5,-3500,0)

    = $13,613.78 or $13,614

    Therefore, the present value of the car amounts to $13,614
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