An investment offers $4,350 per year for 15 years, with the first payment occurring one year from now. a. if the required return is 6 percent, what is the value of the investment? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) b. what would the value be if the payments occurred for 40 years? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) c. what would the value be if the payments occurred for 75 years? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) d. what would the value be if the payments occurred forever? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.1

Ans.

a) The value of the invesment of an annuity of $4,350, at 6% for 15 years is  $42.248,28  

b) If it was for 40 years, the value of the investment would be:  $65.451,39  

c) If it was for 75 years, the value of the investment would be:  $71.582,94  

d) If it was forever, the value of the investment would be:  $72.500  

Explanation:

Hi, all we have to do is solve for "PV" the following equation for all the conditions of the problem, here is the equation.

Where:

A= Annuity or yearly payment ($4,350)

r = require rate of return, in our case 0.06

n= periods to pay

This equation can be used with all the questions of the problem but d) which requires that we use the following equation.

Now, let´s see how to solve all this step by step.

a)

b)

c)

d)

Best of luck

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