Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can someone please show me the excel or google sheets formula for finding the discount rate and present value??thank you Your financial planner offers you

image text in transcribedcan someone please show me the excel or google sheets formula for finding the discount rate and present value??thank you

Your financial planner offers you two different investment plans. Plan X is an annuity of $40,000 per year for 25 years. Plan Y is an annuity for 15 years and an annual payment of $47,000. Both plans will make their first payment one year from today. Find the discount rate at which you would be indifferent between these two plans; that is, the discount rate at which the plans have approximately the same present value. While there are other ways to approach this problem, the most obvious is by trial and error; calculate both present values, and adjust the discount rate until the PVs are equal! Once you find the discount rate to the nearest 0.01%, you are close enough. Plan Y 40,000 47,000 12 13 14 15 16 Annual Payment Term (years) Discount rate 25 Present Value Difference

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Recent Advances In Commodity And Financial Modeling

Authors: Giorgio Consigli, Silvana Stefani, Giovanni Zambruno

1st Edition

3319613189, 978-3319613185

More Books

Students also viewed these Finance questions