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19 June, 21:58

3) Drew receives an inheritance that pays him $54,000 every three months for the next two years. Which of the following is closest to the present value (PV) of this inheritance if the interest rate is 8.9% (EAR) ?

A) $314,366

B) $471,549

C) $392,957

D) $432,000

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Answers (1)
  1. 19 June, 22:24
    0
    the correct answer is C

    Explanation:

    First calculate the APR with quarterly compounding, which equals 8.62% then using a periodic interest rate of 8.62/4%, calculate the present value (PV) of an annuity of $54,000 for eight periods
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