Thread: another interest theory: present value

Q: Calculate the total present value of the following payments:
$600 made at the end of each of the years 1 to 8
$900 made at the end of each of the years 9 to 15
if the annual effective interest rate is 7.5% for the first ten years and 9% thereafter.
I tried to use the present value formula:

PV = X(1+i)^-t

but dun know if it's right or wrong, and does the question have anything to do with the force of interest?

Please help, thanks alot!!!

Originally Posted by suedenation

Q: Calculate the total present value of the following payments:
$600 made at the end of each of the years 1 to 8
$900 made at the end of each of the years 9 to 15
if the annual effective interest rate is 7.5% for the first ten years and 9% thereafter.
I tried to use the present value formula:

PV = X(1+i)^-t

but dun know if it's right or wrong, and does the question have anything to do with the force of interest?

Please help, thanks alot!!!

Use the present value formula separately on each of the 15 payments, finding the right amount X, interest rate i and year t. Then total those present values.