Homework Answers
| Present value of an annuity = C*[(1-(1/(1+r)^t))/r] | |||||
| where C is the annuity payment that is 600. | |||||
| r is the interest rate that is 10%. | |||||
| t is the time period in years that is 10. | |||||
| Present value of the annuity = 600*[(1-(1/(1.10)^10))/.10] | |||||
| Present value of the annuity = 600*[(1-(1/2.593742))/.10] | |||||
| Present value of the annuity = 600*[(1-(.385543)/.10] | |||||
| Present value of the annuity = 600*[(.614457)/.10] | |||||
| Present value of the annuity = 600*[6.144567] | |||||
| Present value of the annuity = 3686.74 | |||||
| You must deposit $3686.74 in the investment account today. |
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