Question

Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,000 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Answer 1

Answer:

Rate	Rate per period	0.05
NPER	Total No of periods	10
PMT	Payment per period	5000
FV	Future Value	0
TYPE	Ending (0),Beginning(1)	0
PV	Present value	38,609	=-PV(0.05,10,5000,0,0)
	(-PV(rate,nper,pmt,fv,type)

Or,

Invest today =Total PV of Cash received
Years		Net Cash received	PV Factor 5%	Present value
1	Cash received	5,000	0.9524	4,762
2	Cash received	5,000	0.907	4,535
3	Cash received	5,000	0.864	4,319
4	Cash received	5,000	0.823	4,114
5	Cash received	5,000	0.784	3,918
6	Cash received	5,000	0.746	3,731
7	Cash received	5,000	0.711	3,553
8	Cash received	5,000	0.677	3,384
9	Cash received	5,000	0.645	3,223
10	Cash received	5,000	0.614	3,070
Total PV of Cash received				38,609
0	Invest today			38,609