Question

Using the time value of money Use the Present Value of $ 1 table (Appendix B, Table B- 1) to determine the present value of $ 1 received one year from now. Assume an 8% 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. Round to three decimal places.

Requirements
1. What is the total present value of the cash flows received over the five- year ­period?
2. Could you characterize this stream of cash flows as an annuity? Why or why not?
3. Use the Present Value of Annuity of $ 1 table (Appendix B, Table B-2) to ­determine the present value of the same stream of cash flows. Compare your results to your answer to Requirement 1.
4. Explain your findings.



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  • CreatedJanuary 16, 2015
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