What is the present value (PV) of an investment that will pay $400 in one year's time, and $400every year after that, when the interest rate is 5%?

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The present value of an annuity is the sum of the present values of each of the individual payments. The present value of a single payment is given by the formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the future valuer is the interest raten is the number of yearsIn this case, the future value of each payment is $400, the interest rate is 5%, and the number of years is infinite (since the payments will continue forever). Therefore, the present value of each payment is:PV = $400 / (1 + 0.05)^1 = $380.95The present value of the annuity is the sum of the present values of each of the individual payments. Therefore, the present value of the annuity is:PV = $380.95 + $380.95 + $380.95 + ... = $8000

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