Answer:
what is the present value of an annuity the pay $500k for 5 years at a discount rate of 7% round to the nearest million $?
To calculate the present value of an annuity that pays $500k for 5 years at a discount rate of 7%, we can use the formula:
PV = C × [(1 - (1 + r)^-n) / r]
where PV is the present value of the annuity, C is the payment per period ($500k), r is the discount rate (7% or 0.07), and n is the number of periods (5).
Plugging in the values, we get:
PV = $500,000 × [(1 - (1 + 0.07)^-5) / 0.07] PV = $500,000 × [(1 - 0.6139) / 0.07] PV = $500,000 × [9.1297] PV = $4,564,850
Rounding to the nearest million, we get a present value of $5 million. Therefore, the present value of the annuity is approximately $5 million.
Step-by-step explanation: