An investment offers $6,600 per year for 10 years, with the first payment occurring one year from now. If the required return is 5 percent, what is the value of the investment? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 35 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 65 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred forever? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $

Question

Cassis

Business

5 August, 09:30

An investment offers $6,600 per year for 10 years, with the first payment occurring one year from now. If the required return is 5 percent, what is the value of the investment? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 35 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 65 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred forever? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $

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Answers (1)

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Krystal · Answer 1

Instructions are listed below

Explanation:

Giving the following information:

An investment offers $6,600 per year for 10 years, with the first payment occurring one year from now. The required return is 5 percent.

A) FV = {A*[ (1+i) ^n-1]}/i

FV = {6600*[ (1.05^10) - 1]}/0.05 = $83,014.09

PV = FV / (1+i) ^n = 83,014.09/1.05^10 = $50,063.39

B) n=35

FV = {6600*[ (1.05^35) - 1]}/0.05 = $596,114.03

PV = 596,114.03/1.05^35 = $108,069.69

C) n=65

FV = {6600*[ (1.05^65) - 1]}/0.05 = $3,014,866.87

PV = 3,014,866.87 / 1.05^65 = $126,463.06

D) PV = 6600/0.05 = $132,000