Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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**Present Value Calculation**

A smooth-talking used-car salesman is offering a great deal on a "pre-owned" car. He mentions, "For only 6 annual payments of $2,600, this beautiful 1998 Honda Civic can be yours." The scenario poses a question: If you can borrow money at 7%, what is the present price of this car? Assume that the payment is made at the end of each year.

**Question:**  
If you can borrow money at 7%, what is the price of this car?

**Solution Section:**  
Price: $____ (Round to the nearest cent.)

**Explanation:**

This task involves calculating the present value of a series of future payments. You need to consider the given interest rate and the timing of the payments to determine what the car is worth in today's dollars. This situation exemplifies a practical application of present value calculations typically addressed in finance courses.

(Note: The image does not contain any graphs or diagrams, so there are no visual elements to describe further.)
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Transcribed Image Text:**Present Value Calculation** A smooth-talking used-car salesman is offering a great deal on a "pre-owned" car. He mentions, "For only 6 annual payments of $2,600, this beautiful 1998 Honda Civic can be yours." The scenario poses a question: If you can borrow money at 7%, what is the present price of this car? Assume that the payment is made at the end of each year. **Question:** If you can borrow money at 7%, what is the price of this car? **Solution Section:** Price: $____ (Round to the nearest cent.) **Explanation:** This task involves calculating the present value of a series of future payments. You need to consider the given interest rate and the timing of the payments to determine what the car is worth in today's dollars. This situation exemplifies a practical application of present value calculations typically addressed in finance courses. (Note: The image does not contain any graphs or diagrams, so there are no visual elements to describe further.)
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