Question

How much would you have to invest today to receive

d. $50,000 each year for 50 years at 7 percent?

Short answer

An investor has to invest $690,037.31 today in order to receive $50,000 each year for 50 years.

Step-by-step solution

Identification of the required information

Payment (PMT) = $50,000

Period (n) = 50 year

Interest Rate (i) = 7%

Present value (PV)

$$\begin{gathered} \text{PV}\mathbf{=}\text{PMT}\times \left[\frac{1-{\left(1+i\right)}^{-n}}{i}\right] \\ \mathbf{=}\$50,000\times \left[\frac{1-{\left(1+7\%\right)}^{-50}}{7\%}\right] \\ \mathbf{=}\$690,037.31 \end{gathered}$$