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Q: Accounting question ( Answered,   0 Comments )
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 Subject: Accounting question Category: Business and Money > Accounting Asked by: steph21480-ga List Price: \$2.00 Posted: 27 Nov 2006 05:22 PST Expires: 27 Dec 2006 05:22 PST Question ID: 785896
 ```How much must be invested now to receive \$20,000 for ten years if the first \$20,000 is received today, and the rate is 8%?``` Request for Question Clarification by omnivorous-ga on 27 Nov 2006 07:19 PST ```Steph -- When does the "\$20,000 for 10 years" start? A year from now? Five years from now? Best regards, Omnivorous-GA``` Clarification of Question by steph21480-ga on 27 Nov 2006 07:37 PST ```Omnivorous, I'm assuming that the ten year period starts now. Thanks for your help!!```
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 Subject: Re: Accounting question Answered By: omnivorous-ga on 27 Nov 2006 08:41 PST
 ```Steph21480 -- This question asks: what is the future value of \$20,000 paid annually for 10 years, starting today if the interest rate is 8%? Each year's payment will have a discount factor. Year 1 is 1 -- because it is being paid today. (Standard NPV calculations would probably refer to year 1 as "year 0" because it is a current payment.) Discount factor: Year 1: 1.0000 Year 2: 0.925925926 Year 3: 0.85733882 Year 4: 0.793832241 Year 5: 0.735029853 Year 6: 0.680583197 Year 7: 0.630169627 Year 8: 0.583490395 Year 9: 0.540268885 Year 10: 0.500248967 The total future value is \$144,937.76. This isn't part of the question but year 1's payment is \$11,595.02 in interest -- and \$8,404.98 in principal. Each year the "interest" portion will drop -- and the "principal" portion will rise until the enitre \$144,937.76 is paid out. Best regards, Omnivorous-GA```
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