Question

a real estate investor wants to purchase a rental property that generates an annuity payment of $3,000 per month. if the interest rate is 6 percent, how much should the investor invest today to receive the desired monthly payment for the next 10 years? round your answer to the nearest whole dollar.(1 point) responses $270,220 $270,220 $250,125 $250,125 $180,225 $180,225 $350,650 $350,650

Answer 1

[AI-generated answer — Bot GPT 3.5]

To calculate the present value of an annuity, you can use the formula:

PV = PMT * (1 - (1 + r)^-n) / r

where:
PV = Present Value
PMT = Payment per period ($3,000)
r = Interest rate per period (6% or 0.06)
n = Total number of periods (10 years * 12 months = 120 months)

Plugging in the values, we get:

PV = $3,000 * (1 - (1 + 0.06)^-120) / 0.06
PV = $3,000 * (1 - (1.06)^-120) / 0.06
PV = $3,000 * (1 - 0.146770) / 0.06
PV = $3,000 * (0.853230) / 0.06
PV = $42,646.92

Therefore, the real estate investor should invest $42,647 today to receive the desired monthly payment for the next 10 years. The closest answer option is $42,647.