Roger has just lost a lawsuit and has agreed to make equal annual payments of $18,500 for the next 5 years with the first payment due today. The value of this liability today is $75,000. What is the interest rate on the payments? 7.42% 9.33% 6.91% 10.51% 11.74%
Added by Kevin C.
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The formula for the present value of an annuity due (where the first payment is made today) is: \[ PV = P \times \left(1 + r\right) \times \frac{1 - (1 + r)^{-n}}{r} \] Where: - \(PV\) = Present Value ($75,000) - \(P\) = Payment amount ($18,500) - \(r\) = Show more…
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