Question

How much must you invest today in order to receive $10,000 at the end of each year for the next 8 years assuming you can earn 5 percent interest? Question 3 0.13 pts You invest $ 2,000 at the end of each year for the next 3 years. Calculate the value of the investment at the end of 3 years assuming you earn 6% interest.

Answer 1

2.

Annual amount to be received = $10,000

Time (n) = 8 year

Interest rate (i) = 5%

Amount to be invested today = Annual amount to be received x Present value annuity factor (i%, n)

= 10,000 x PVAF (5%, 8)

= 10,000 x 6.46321

= $64,632

3.

Annual investment = $2,000

Time (n) = 3 year

Interest rate (i) = 6%

Value of investment at the end of 3 years = Annual investment x Future value annuity factor

= 2,000 x FVAF (6%, 3)

= 2,000 x 3.1836

= $6,367 (Rounded to whole number)

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