Answer:
The present value is [tex]PV = \$ 396,987[/tex]
Step-by-step explanation:
From the question we are told that
The interest payment per year is [tex]C = \$ 85[/tex]
The principal payment is [tex]P = \$ 1000[/tex]
The duration is n = 8 years
The interest rate is [tex]r = 10\% = 0.10[/tex]
The present value is mathematically represented as
[tex]PV = [ \frac{C}{r} * [1 - \frac{1 }{ (1 +r)^n} ] + \frac{P}{(1 + r)^n} ][/tex]
substituting values
[tex]PV = [ \frac{85}{0.10} * [1 - \frac{1 }{ (1 +0.10)^8} ] + \frac{1000}{(1 + 0.10)^ 8} ][/tex]
[tex]PV = \$ 396,987[/tex]
