For the following questions, assume an end-of-year cash flow of $250 and a 10% discount rate. a.
Question:
a. What is the present value of a single cash flow?
b. What is the present value of a 5-year annuity?
c. What is the present value of a 10-year annuity?
d. What is the present value of a 100-year annuity?
e. What is the present value of a $250 perpetuity?
f. Do you detect a relationship between the number of periods of an annuity and its resemblance to a perpetuity? Explain.
Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...
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Related Book For
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
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