10 points c. The amount a person would have to deposit today (present value) at an...

Question

Question

Answer 1

Answer #1

c.Present value=$2500*Present value of discounting factor(rate%,time period)

=$2500/1.09^5

=$2500*0.650

=$1625(Approx).

d.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$500[1-(1.08)^-5]/0.08

=$500*3.993

=$1996.50(Approx).

Answer 2

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