Question

1. The Shawness Company must pay $5,500 one year from today; $6,500 two years from today; $7,500 three years from today; $9,500 four years from today; and $15,000 five years from today to settle a liability. At an interest rate of 6.5%, what is the present value of these future cash flow payments?

2. You currently have $2,500 in your savings account. You would like to have $8,000 four years from today. How much must you deposit in equal amounts at the end of each month for the next five years in order to reach your goal at an interest rate of 9% per year, compounded monthly?

Answer 1

Hi, As per the HomeworkLib guidelines, in case of multiple questions, I need to solve the first question.

The present value is computed as shown below:

= Future value / (1 + r)ⁿ

So, the amount will be computed as follows:

= $ 5,500 / 1.065 + $ 6,500 / 1.065² + $ 7,500 / 1.065³ + $ 9,500 / 1.065⁴ + $ 15,000 / 1.065⁵

= $ 35,436.75 Approximately

Feel free to ask in case of any query relating to this question