Find the present value of 11 payments of 3576 made at the start of each year. Interest is 9% compounded annually.
I got this answer: 24335.39 which is wrong!
The correct one is: 26525.58 <
I have done it this way.. but I got the wrong answer....
3576 * [ (1 - (1.09)^-11 )÷ 0.09 ] = 24335.39
where did I go wrong?
2007-08-26 02:12:04 · 2 answers · asked by Yuuji 1 in Science & Mathematics ➔ Mathematics
Robert L:
I thought that too. ^^
thanks for clearing it up for me ^_^
2007-08-26 05:18:15 · update #1
I got the same answer you did with a separate calculation that I have been using for years.
Maybe we are both right and the problem's posted answer is wrong.
.
2007-08-26 03:07:15 · answer #1 · answered by Robert L 7 · 0⤊ 0⤋
The text answer is correct.
PV = 3576*[1.09^(-0) + 1.09^(-1) +...+1.09^(-10)]
PV = 3576*[1-1.09^(-11)]/[1-1.09^(-1)]
PV =~ 3576*7.4177
The present value of one per period in advance is:
PV = [1-(1+i)^(-n)]/[1-(1+i)^(-1)]
The denominator is the one-period discount rate [1-(1+i)^(-1)], not the interest rate.
Look it up online as an "annuity due."
NOTE: you'll need to mouseover the longer lines of the solution to see the full text, since this interface is, well, imperfect.
2007-08-26 04:02:03 · answer #2 · answered by richarduie 6 · 1⤊ 0⤋