Mike and Molly would like to place a sum of money in an account that would...
Mike and Molly would like to place a sum of money in an account that would generate an annual payment of $10,000 for the next 4 years to their daughter who is in college. What present value would generate this annual payment if they can earn an annual return of 10%?
Homework Answers
Answer = Present value that would generate 4 annual payments of $10000 at 10% return = $31698.65
Reason -
Present value = equal annual payment * present value annuity factor, 10%, 4 years
= 10000 * 3.16986544634
= 31698.6544634 or $31698.65 ( rounded off )
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