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

Question

Jocelyn

Business

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

+1

Answers (1)

Know the Answer?

Craig Coleman · Answer 1

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

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) $314,366B) $471,549C) $392,957D) $432,000

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