Charles has to pay $103 per year for the next 6 years. If the appropriate discount rate is 0.128, what would it cost tod...

Question

Question

Charles has to pay $103 per year for the next 6 years. If the appropriate discount rate is 0.128, what would it cost today to settle his debt?

Answer 1

Answer #1

This question requires application of PV of annuity formula, according to which

PV =

[1-(4+5)-) [1-(1+r)-n LT P= Periodic Payment r=rate per period n = number of periods

$PV = 103 * 1-(1+0.128)-6 PV = 103* 0.128$

PV = 103 * 4.0199

PV = $414.05

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Answer 2

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