3. Kim just got a job. She is so happy that she decided to reward herself...

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Question

3. Kim just got a job. She is so happy that she decided to reward herself by purchasing a rare 1980 blue YUGO. TA-R-US used c

Answer 1

Answer #1

3.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=2000*[1-(1.09)^-8]/0.09

=2000*5.53481911

=$11069.64(Approx)

Hence Kim should choose to make 8 annual payments as they have lower present value as compared to $14000 now.

4.Present value=3,000,000*Present value of discounting factor(rate%,time period)

=3,000,000/1.06^5

=3,000,000*0.747258173

=$2241774.52(Approx)

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Answer 2

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