An investment promises to pay $6,000 at the end of each year for the next three years and $4,000 at the end of each year for years 4 through 7. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest cent. If you require a 11 percent rate of return on an investment of this sort, what is the maximum amount you would pay for this investment? $ Assuming that the payments are received at the beginning of each year, what is the maximum amount you would pay for this investment, given a 11 percent required rate of return? $
An investment promises to pay $6,000 at the end of each year for the next three years and $4,000 at the end of each year for years 4 through 7. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest cent. If you require a 11 percent rate of return on an investment of this sort, what is the maximum amount you would pay for this investment? $ Assuming that the payments are received at the beginning of each year, what is the maximum amount you would pay for this investment, given a 11 percent required rate of return? $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
An investment promises to pay $6,000 at the end of each year for the next three years and $4,000 at the end of each year for years 4 through 7. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest cent.
-
If you require a 11 percent rate of
return on an investment of this sort, what is the maximum amount you would pay for this investment?
$ -
Assuming that the payments are received at the beginning of each year, what is the maximum amount you would pay for this investment, given a 11 percent required rate of return?
$
Transcribed Image Text:The image is a screenshot of an Excel spreadsheet titled "Time Value Formulas," which includes formulas for calculating present value interest factors (PVIF) and present value interest factor of annuities (PVIFA).
### Table II: Present Value Interest Factor (PVIF)
- **Formula:** \( PVIF = \frac{1}{(1 + i)^n} \)
- **Interest (i):** An input cell for the interest rate.
- **Periods (n):** An input cell for the number of periods.
- **Factor (F):** The factor is calculated and currently shows the value of 1.
### Table IV: Present Value Interest Factor of Annuities (PVIFA)
- **Formula:** \( PVIFA = \frac{1 - \frac{1}{(1 + i)^n}}{i} \)
- **Interest (i):** An input cell for the interest rate.
- **Periods (n):** An input cell for the number of periods.
- **Num (Numerator):** Displays 0, indicating the initial calculation setup.
- **Denom (Denominator):** Displays 0, indicating the initial calculation setup.
- **Factor (F):** The factor currently shows an error, "#DIV/0!", due to division by zero.
These tables are designed for educational purposes, explaining key financial calculations regarding the time value of money. Users can input different interest rates and periods to see how the factors change.
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