Question

In order to avoid estate taxes, your rich aunt Federica will pay you $10,000 per year for 4 years, starting 1 year from now. What is the PV? r=7%. How much will you have 4 years from now if you invest each gift at 7%?

Answer 1

Answer:

$33,872

Explanation:

In this question, we have to compute the present value which is shown below:

= Annual payment for four years × PVIFA for four years at 7%

= $10,000 × 3.3872

= $33,872

Refer to the PVIFA table.

We multiply the annual payment with the PVIFA to allow the exact amount to come. The present value comes after taking the discount rate into account for the given set of periods