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Present Value of future payments

Your friend has given you a hot tip about an investment deal that will pay off $6,000 a year at the end of each of the next three years. If your required rate of return for investments with this degree of risk is 7%, approximately how much is the investment worth to you today?

a. $4,900

b. $14,695

c. $15,745

d. $19,290

You've been offered the opportunity to invest $200,000 for 10 years in return for 10 annual payments of $30,000 each. What annual percent rate return will you get if you take the deal?

a. Between 20 and 21%

b. Between 16 and 17%

c. Between 8 and 9%

d. 15%

From a financial point of view, which is the best choice, to receive $800 now, or a note that promises $1,000 three years from now? Threeyear interest rates are 7%.

a. $800 now

b. $1,000 three years from now

Solution Preview

See attached Excel file.

Your friend has given you a hot tip about an investment deal that will pay off $6,000 a year at the end of each of the next three years. If your required rate of return for investments with this degree of risk is 7%, approximately how much is the investment worth to you ...

Solution Summary

Solution helps in estimating Present Value of future payments;

$2.19