You will receive annual payments of $800 at the end of each year for 12 years. the first payment will be received in year 3. what is the present value of these payments if the discount rate is 7 percent?

a. $5,465.20
b. $6,018.52
c. $6,299.80
d. $5,549.96
e. $6,856.60

Option (d) $5,549.96

Explanation:

Data provided in the question:

Annual payments = $800

Time, n = 12 years

Discount rate, r = 7% = 0.07

Now,

PV2 = Annual payments × ((1 - (1 + r)⁻ⁿ)) ÷ r ) × (1 + r)

=  $800 × ( (1 - ( 1 + 0.07)¹²)) ÷ 0.07) × (1 + 0.07)

PV2 = $6,354.15

Therefore,

Present value today = PV2 ÷ (1 + r )²

= $6,354.15 ÷ (1 + .07)²

or

= $5,549.96

Hence,

Option (d) $5,549.96

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know