Question

Use Table A: Present Value of $1 to determine the present value of $1 received one year from now. Assume a 14% interest rate. Use the same table to find the present value of $1 received two years from now. Continue this process for a total of five years.
a. What is the total present value of the cash flows received over the five-year period?
b. Could you characterize this stream of cash flows as an annuity? Why or why not?
c. Use Table B: Present Value of Annuity of $1 to determine the present value of the same stream of cash flows. Compare your results to your answer in Part a.
d. Explain your findings.


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  • CreatedApril 30, 2015
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