Answer :
Answer:
"$8,175.72" is the right solution.
Explanation:
The given values are:
Periodic payments,
C = $500
Interest rate,
r = 8%
i.e.,
= [tex]\frac{8}{4}[/tex] = [tex]2[/tex]%
Number of periods,
n = 5 years,
i.e.,
= [tex]5\times 4[/tex] = [tex]20[/tex]
As we know,
The present value of annuities 5 years ago will be:
⇒ [tex]Present \ Value =C\times \frac{[1-(1+r)^{-n}]}{5}[/tex]
On substituting the given values, we get
⇒ [tex]=500\times \frac{[1-(1+0.02)^{-20}]}{0.02}[/tex]
⇒ [tex]=500\times \frac{1-0.6729713331}{0.02}[/tex]
⇒ [tex]=500\times 16.35143335[/tex]
⇒ [tex]=8,175.72[/tex] ($)