Gotham City has considered paying an annual bonus to Batman (according to the considerations mentioned below)...

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Gotham City has considered paying an annual bonus to Batman(according to the considerations mentioned below) for helping themkeep the city of criminals clean. However, Batman prefers thepayment in a single display to the year 5. What single payment atthe end of year 5 is equivalent to a series of equal annualpayments of $ 850 Dlls, which in year 1 and end at the end of theyear 12? The interest rate is 7% annual compound

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4.5 Ratings (982 Votes)


Assuming rate of return is 9% and hance taking the PV factor @ 9%

Year	Amount	Interest	Annual Cashflow (in$)	PV factor @ 9%	PV Of Cashflow
1	850	59.5	909.50	0.92	834.40
2	909.50	63.67	973.17	0.84	819.09
3	973.17	68.12155	1,041.29	0.77	804.06
4	1,041.29	72.8900585	1,114.18	0.71	789.31
5	1,114.18	77.9923626	1,192.17	0.65	774.83
				TOTAL	4,021.70

	Hence the Single one time payment which is made can be made at the end of Year 5 is 4021.70$

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Gotham City has considered paying an annual bonus to Batman(according to the considerations mentioned below) for helping themkeep the city of criminals clean. However, Batman prefers thepayment in a single display to the year 5. What single payment atthe end of year 5 is equivalent to a series of equal annualpayments of $ 850 Dlls, which in year 1 and end at the end of theyear 12? The interest rate is 7% annual compound

Gotham City has considered paying an annual bonus to Batman (according to the considerations mentioned below)...

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