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3 February, 06:48

An investment offers $7,100 per year for 20 years, with the first payment occurring one year from now. If the required return is 7 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 45 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 70 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

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  1. 3 February, 09:11
    0
    Instructions are listed below.

    Explanation:

    Giving the following information:

    An investment offers $7,100 per year for 20 years, with the first payment occurring one year from now.

    A) i = 0.07

    First, we need to calculate the final value:

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

    A = annual deposit

    FV = {7,100*[ (1.07^20) - 1]}/0.07 = 291,068

    PV = FV / (1+i) ^n

    PV = 291,068/1.07^20 = 75,217.50

    B) n=45

    FV = {7,100*[ (1.07^45) - 1]}/0.07 = 2,028,820.11

    PV = 2,028,820.11/1.07^45 = $96,599.20

    C) n=70

    FV = {7,100*[ (1.07^70) - 1]}/0.07 = 11,460,352.64

    PV = 11,460,352.64/1.07^70 = 100,538.76
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