Question

g What is the value today of receiving $6,000 at the end of each six-month period for the next four years, assuming an interest rate of 8%

Answer 1

Answer: $40,396.2‬0

Explanation:

This is a frequent amount every period so this is an annuity and the present value is the present value of an annuity.

Period = 2 * 4 years = 8 semi annums

Interest = 8%/2 = 4% per semi annum

Present Value = 6,000 * $\frac{1 - (1 + 0.04) ^{-8} }{0.04}$

= 6,000 * 6.7327

= $40,396.2‬0