SOLUTION: What is the present value (PV) of an investment that will pay $400 in one year's time, and $400 every year after that, when the interest rate is 5%?
Algebra ->
Finance
-> SOLUTION: What is the present value (PV) of an investment that will pay $400 in one year's time, and $400 every year after that, when the interest rate is 5%?
Log On
Question 1038543: What is the present value (PV) of an investment that will pay $400 in one year's time, and $400 every year after that, when the interest rate is 5%? Answer by Othel(27) (Show Source):
You can put this solution on YOUR website! We know that the interest rate is 5%, and that 5% of the money invested is $400.
I think we must assume that the $400 made every year is paid out, and not added to the amount in the investment, so the present value remains the same throughout the years.
So to put this in the form of a question, what number multiplied by .05 equals 400?
And mathematically...
which is...
The present value is $8000
Check your answer!
I hope this helps! Learn on
(