Solved Question: You decide to invest $2000 per year for 10 years at an annual interest rate of 8%

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Question:

You decide to invest $2000 per year for 10 years at an annual interest rate of 8%. What is the present value of your 10-year investment?

Answer:

Periodic payment (P) = $2000

Rate per period (r) = 8%

Number of periods (n) = 10 years

PV of investment = P[\frac{1 - (1 + r)^{-n}}{r}]

PV of investment = 2000[\frac{1 - (1 + .08)^{-10}}{.08}]

PV of investment = $13,420.16

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