An investment offers $6,700 per year, with the first payment occurring one year from now. the required return is 6 percent. a. what would the value be today if the payments occurred for 15 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 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 today 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 today if the payments occurred forever? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

Ans.

a) The value today if the payments occured for 15 years would be:$65,072.07

b) The value today if the payments occured for 40 years would be: $100,810.19

c) The value today if the payments occured for 75 years would be: $110,254.18

d) The value today if the payments occured forever would be:  $111,666.67  

Explanation:

Hi, except for c) (we´ll talk about later about c.) the equation that we need to use is:

Where:

A = Annuity (yearly payment, in our case $6,700)

r = Discount rate (in our case 6% or 0.06 for the formula)

n = Period of time (for a) is 15, b) is 40, c) is 75)

So, let´s solve a)

For b) is:

For c) is:

Finally, for d) which is if the payments were made forever, the formula would be:

So the present value if this payments were made forever would be:

Best of luck.

answer; risk transference;

answer; (10%) commission;