Jude wants to receive $1,100 at the beginning of each of the next eight years. If his opportunity cost rate is 9 percent compounded annually, how much must he deposit in an account today? Use a financial calculator to make the calculation.
A)$6,088
B)$7,086
C)$6,874
D)$6,636
E)$6,420

Question

Jude wants to receive $1,100 at the beginning of each of the next eight years. If his opportunity cost rate is 9 percent compounded annually, how much must he deposit in an account today? Use a financial calculator to make the calculation. 
A)$6,088
B)$7,086
C)$6,874
D)$6,636
E)$6,420

Quizplus · Accepted Answer

Using a financial calculator:
N = 8 (since there are 8 payments)
I/Y = 9% (opportunity cost rate)
PMT = -1,100 (since Jude wants to receive $1,100 at the beginning of each year)
FV = 0 (since he wants to empty the account after the last payment)

Solving for PV (present value), we get:

PV = $6,636

Therefore, the amount Jude must deposit in the account today is $6,636. The correct answer is D.

Jude Wants to Receive $1,100 at the Beginning of Each