An investment offers $5,100 per year, with the first payment occurring one year from now. The required return is 5 percent.

Problem 6-4 Calculating Annuity Present Value [LO1]

An investment offers $5,100 per year, with the first payment occurring one year from now. The required return is 5 percent.

a.    What would the value be today if the payments occurred for 10 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.   
What would the value be today if the payments occurred for 35 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

c.    What would the value be today if the payments occurred for 65 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
d.    What would the value be today if the payments occurred forever? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)


Explanation

Calculator Solution:

   

Enter

10

5%

±$5,100

N

I/Y

PV

PMT

FV

Solve for

$39,380.85

  

Enter

35

5%

±$5,100

N

I/Y

PV

PMT

FV

Solve for

$83,508.39

  

Enter

65

5%

±$5,100

N

I/Y

PV

PMT

FV

Solve for

$97,721.46

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