At 6 5 APR, what is the present value of $2263 per yearforever, if th...

At 6.5â€‹% â€‹APR, what is the present value of â€‹$2263 per yearâ€‹ forever, if the first...

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At 6.5â€‹% â€‹APR, what is the present value of â€‹$2263 per yearâ€‹forever, if the first payment will be received 16 years fromâ€‹today? â€‹ (Rounded to the nearest 10â€‹ cents.)

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Present value of the perpetuity payment each year= annual payment/discount rate

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â = $2,263/0.065

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â = $34,815.38

The first payment is made 16 years from today. In order to calculate the present value of the perpetual payment of $2,263 made 16 years from today, the below formula is used: present value of perpetuity payment/(1+ discount rate)^time

Â Â Â Â Â Â Â Â = $34,815.38/(1.065)^16

Â Â Â Â Â Â Â Â = $34,815.38/ 2.7390

Â Â Â Â Â Â Â Â = $12,710.98.

In case of any query, kindly comment on the solution.

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