Alice is selling her old car for $5997. If a prospective buyer offers to make yearly...
Alice is selling her old car for $5997. If a prospective buyer offers to make yearly payments for the next 4 years, what should Alice set these payments to if the correct discount rate is 0.24?
Homework Answers
Present value = Annuity * [1 - 1 / (1 + r)n] / r
5997 = Annuity * [1 - 1 / (1 + 0.24)4] / 0.24
5997 = Annuity * [1 - 0.422974] / 0.24
5997 = Annuity * 2.404277
Annuity = $2,494.31
Set of payments will be $2,494.31
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