Homework Question #3 • The insurance settlement pays you $50,000 in one year, Growing at 6%...

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Homework Question #3 • The insurance settlement pays you $50,000 in one year, Growing at 6% per year for a total of 10 years

Answer 1

Answer #1

The value today is found using present value of growing annuity equation

11 PV: = 1 1 AX r-9-9 X (1+g 1+r

where r = discount rate = 4 %

g = growing rate = 6 %

101 1 PV = $50,000 x 1 0.04 – 0.06 X 1 + 0.06 1+ 0.04 0.04 – 0.06

The value today = $ 524,581.34

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Answer 2

Answer #2

PV=50000((1/(4%-6%))(1-((1+6%)/(1+4%))^10))=524581.339

answered by: anonymous

Answer 3

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