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You have choice between 1000 paid at beginning of month for period of 10 years or a lump sum paid immediately. If u can invest at an effective annual interest rate of 5 percent, what is minimum lump sum u would be willing to accept?
the answer is 95152. How?
- BryceLv 72 months agoFavorite Answer
This uses the formula for the present value of an annuity due (with payment made at the beginning of each period).
(1 + r/12)^12= 1.05; r≈ 0.0488894...
x= [1 - (1 + r/12)^(-119)]/(r/12)= 94.15167...
S= 1000[1 + x]≈ 95152
- Anonymous2 months ago
move to homework help. damn repeat cheater.