Annuity question!! (1 Viewer)

[p3rf3ction]

An opal mine is for sale. it is anticipated that it will provide an income of $55 000 per year for the next 6 years and then will be exhausted. If the current interest rate is 7.2% p.a. compounded annually, what is the present value of the mine? Answer correct to nearest $100.

Now the answer involves using the big formula, but it doesnt make sense to me because isn't the 55 000 the future value, and not an installment? Please help guys

 

[sointoyourself]

use N= A/(1 + r) n
Where A= 55 000 , r = 0.072 and n=6

should work i think

 

[p3rf3ction]

Yeah thats what i thought. But the answer requires the other formula. I think they got it wrong though.

 

[_1234567890]

use N= A/(1 + r) n
Where A= 55 000 , r = 0.072 and n=6

should work i think

that is for a single payment, not a stream of payments

Answer = (55000/0.072) (1- (1.072)^(-6) ) = 260 500

 

[bale]

Owned general maths bit good