Question

You and your heirs will receive $35,000 per year forever, with the first payment received at the end of the first year. If the appropriate discount rate is 8%, what is the present value of your prize?

Answer 1

$32,407.41

Step-by-step explanation:

Present value (PV)= C/(1+i)^n

C=amount of money to be discounted

n=number of periods

I=interest rate.

C= $35,000

n=1 year

I=8% or 0.08

PV= $35,000/(1+0.08)^1

= $35,000/1.08

=$32,407.41