Question

Calculate the amount of money that you need to deposit now in order to receive 11 annual uniform payments of $10,500 that begin 1 year from now at an interest rate of 12% per year. a) $90,909.09 b) $100,000.00 c) $110,000.00 d) $120,000.00

Answer 1

Answer: The correct answer is a) $90,909.09.

Step-by-step explanation:To calculate the amount of money that needs to be deposited now, we can use the formula for the present value of an annuity.

The present value (PV) of an annuity is given by the formula:

PV = PMT * [1 - (1 + r)^(-n)] / r

Where:

PMT is the payment amount per period ($10,500 in this case)

r is the interest rate per period (12% per year, so 0.12)

n is the number of periods (11 in this case)

Substituting the values into the formula:

PV = $10,500 * [1 - (1 + 0.12)^(-11)] / 0.12

Calculating this expression gives us approximately $90,909.09.

Therefore, the correct answer is a) $90,909.09. You would need to deposit this amount now to receive 11 annual uniform payments of $10,500 starting from 1 year from now at an interest rate of 12% per year.