You are considering an investment that promises to pay $1,000 per year for the next 10 years

Finance Sep 11, 2020

You are considering an investment that promises to pay $1,000 per year for the next 10 years. The interest rate associated with investments having similar risk is 6.0%.

How much would you be willing to pay for this investment?

Expert Solution

We can calculate the present value by using the following formula in excel:-

=-pv(rate,nper,pmt,fv)

Here,

PV = Present value

Rate = 6.0%

Nper = 10 periods

Pmt = $1,000

FV = $0

Substituting the values in formula:

= -pv(6%,10,1000,0)

= $7,360.09

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