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3 January, 07:40

Nancy Billows promised to pay her son $600 quarterly for four years. If Nancy can invest her money at 6% in an ordinary annuity, she must invest how much today? Round to the nearest cent.

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  1. 3 January, 08:07
    0
    8,478.76

    Explanation:

    This is a time value of money (TVM) question; an ordinary annuity.

    Using a financial calculator, input the following to calculate the PV of the annuity;

    Recurring quarterly payment = 600

    Quarterly interest rate; I = 6%/4 = 1.5%

    Duration of annuity = 4*4 = 16

    One time future cashflow; FV = 0

    then compute a PV = $8478.76

    Therefore, she must invest $8,478.76 today to meet the annuity payments
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Home » Business » Nancy Billows promised to pay her son $600 quarterly for four years. If Nancy can invest her money at 6% in an ordinary annuity, she must invest how much today? Round to the nearest cent.
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