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
Exal
Transcribed Image Text:ed at an annual rate c
ona. What amount sh
wear for 30 years aften
Expert Solution
Step 1
LU 13-2a
1.Present value is the amount of money which we invest today. Since it is semi annually so the rate of interest will be divided by 2 and number of years will be multiplied by 2.
Period= 5 years x 2=10
Rate= 5% / 2=2.5 %
By looking the period and rate in present value of an annuity table, the intersection gives present value of 8.7521
Present Value= Ordinary Annuity x Table Value
=$20,000 x 8.7521
=175,042
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