Suppose that you are considering an investment that will pay you $4000 per year for the next five years.The appropriate rate of interest is 5%.You want to know the present value of the cash flows from this investment.To solve this problem in Microsoft Excel,you would use which of the following excel formulas?
A)=PV(.05,5,4000,0,0)
B)=PV(.05,5,4000,0,1)
C)=PV(5,.05,4000,0)
D)=PV(5,5,4000,0)

Question

Quizplus · Accepted Answer

The correct formula to use for this problem is the present value formula, which is represented by PV. Using the given information, the formula in Excel would be PV(rate, nper, pmt, [fv], [type]). Plugging in the values, we get PV(0.05, 5, 4000, 0, 0), which simplifies to PV(0.05, 5, -4000). Therefore, the correct formula is A)=PV(.05,5,4000,0,0).

Suppose That You Are Considering an Investment That Will Pay