An investment today of $8,424 at 6% will yield payments of $2,000 per year for five years, or total payments of $10,000 over five years. The reason for this increase is that the interest is being earned on principal that is left invested each year.

Question

Camille Burgess

Business

23 September, 08:23

An investment today of $8,424 at 6% will yield payments of $2,000 per year for five years, or total payments of $10,000 over five years. The reason for this increase is that the interest is being earned on principal that is left invested each year.

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Kenyon Mcguire · Answer 1

The computation of the present value is shown below"

= Annual payment * PVIFA factor for 5 years at 6%

= $2,000 * 4.2124

= $8424.80

Simply we multiply the annual payment with its PVIFA factor so that the correct value of the present value can come.

So, the given statement is true.

And, refer PVIFA table so that the interest factor can come.