Question

How much would you have to Invest today to receive the following? Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

Answer 1

PMT*(1-(1/(1+r^n)) )/r 1) Present value = $89,465.39 $7,800*(1-(1/(1.06^20)))/0.06 PMT (1-(1/(1+rAn)/r $415,686.37 2) Present value= $53,000*(1-(1/(1.12425)))/0.12

Answer 2

SOLUTION 

Amount to be invested today

= PV of the mentioned annuity.

= A ((1+r)^n - 1) / (r * (1+r)^n)

= 7800((1+0.06)^20 - 1) / (0.06 * (1 + 0.06)^20)

= 89465.39 ($)  (ANSWER)

PV of the mentioned annuity.

= A ((1+r)^n - 1) / (r * (1+r)^n)

= 53000((1+0.12)^25 - 1) / (0.12 * (1 + 0.12)^25)

= 415686.37 ($)  (ANSWER)