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An investment offers $6,200 per year for 20 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment

Sagot :

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Answer:

$65,682.89

Explanation:

Calculation for what is the value of the investment

Using this formula

PVA = C({1 − [1 / (1 + r)t]} / r)

Let plug in the formula

Where,

C represent Investment offer =$6,200

R represent Required Return=7%

T =20 years

PVA = $6,200{[1 − (1 /( 1+.07*20 years)] / .07

PVA = $6,200{[1 − (1 / 1.07*20 years)] / .07}

PVA = $6,200{[1 − (1 / 2.14)] / .07}

PVA= $65,682.89

Therefore the value of the investment will be $65,682.89

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