Question

Chapter 4 Help Save & Exit Wilt has a consulting contract that calls for annual payments of $50,000 a year for five years with the first payment due today. What is the current value of this contract if the discount rate is 8.4 percent? Multiple Choice $214,142 50 $201,86747 $195,618 19 g 1 of 5 Next

Answer 1

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Answer 1)
	we have to use financial calculator to solve this problem
	set the calculator at Begin mode and put below
	FV		0
	PMT		-50000
	N		5
	I		8.40%
	Compute PV		$214,142.50
	Correct answer is option $214142.5
Answer 2)
First we have to compute the present value of first annuity
	we have to use financial calculator to solve this problem
	set the calculator at Begin mode and put below
	FV		0
	PMT		-2000
	N		20
	I		6.50%
	Compute PV		$23,469.42
as per question 2nd annuity has present value of $ 22,037.01
	Put below in financial calculator (at normal mode)
	FV		0
	PV		($23,469.42)
	I		6.50%
	N		20
	Compute PMT		$2,130.00
	Correct answer is $ 2130