# Your inheritance will pay you $100,000 a year for five years beginning now. you can invest it in a cd that will pay 7.75 percent annually. what is the present value of your inheritance?

QUESTION POSTED AT 18/04/2020 - 05:52 PM

QUESTION POSTED AT 18/04/2020 - 05:52 PM

Hi there

The formula of the present value of annuity due is

Pv=pmt [(1-(1+r)^(-n))÷r]×(1+r)

Pv present value?

PMT payment per year 100000

R interest rate 0.0775

N time 5 years

So

Pv=100,000×(((1−(1+0.0775)^(

−5))÷(0.0775))×(1+0.0775))

=433,064.19 ....Answer

Hope it helps

The formula of the present value of annuity due is

Pv=pmt [(1-(1+r)^(-n))÷r]×(1+r)

Pv present value?

PMT payment per year 100000

R interest rate 0.0775

N time 5 years

So

Pv=100,000×(((1−(1+0.0775)^(

−5))÷(0.0775))×(1+0.0775))

=433,064.19 ....Answer

Hope it helps

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