Answer:
the value of the payments today is 14,047
Explanation:
this problem can be solved applying the concept of annuity, keep in mind that an annuity is a formula which allows you to calculate the present value of future payments affected by an interest rate. by definition the present value of an annuity is given by:
[tex]a_{n} =P*\frac{1-(1+i)^{-n} }{i}[/tex]
where [tex]a_{n}[/tex] is the present value of the annuity, [tex]i[/tex] is the interest rate for every period payment, n is the number of payments, and P is the regular amount paid. so applying to this particular problem, we have:
[tex]a_{10} =2,000*\frac{1-(1+0.07)^{-10} }{0.07}[/tex]
[tex]a_{10} =14,047[/tex]
