Question

What is the present value of $6,000 to be received at the end of each of eight periods, assuming the first payment occurs at the end of the fourth year and an interest rate of 10%?
a. 36, 454
b. 24 049
c. 32010
d. 38970

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Annual payment= $6,000

Number of payments= 8

Total years to PV= 12

Interest rate= 10%

First, we need to calculate future value:

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

A= annual payment

FV= {6,000*[(1.1^8) - 1]} / 0.06

FV= $114,358.88

Now, the present value:

PV= FV/(1+i)^n

PV= 114,358.88/1.1^12

PV= $36,438.26