After he was injured in a car accident, the insurance company promised to pay Fred $2,000...
After he was injured in a car accident, the insurance company promised to pay Fred $2,000 per month for 8 years. Assuming Fred's opportunity cost is 10.5 percent annually, what is the present value of Fred's settlement?
Solve using excel cell functions
Homework Answers
| Period (in years) | 8 |
| Monthly payment | $2,000 |
| Opportunity cost | 10.5% |
| Future value | $0 |
| Present value | $129,533.54 |
Calculations
Payment is monthly. so opportunity cost will be monthly and period will also be in months.
monthly payment is entered as negative value so that formula gives present value as positive value.
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