# Compute the present value (PV) of an annuity that pays $320 forever if the opportunity cost rate is (a) 4 percent, (b) 8 percent, (c) 10 percent. Why does the PV decrease as the opportunity cost increases?

Chapter 4, Problems #17

Compute the present value (PV) of an annuity that pays $320 forever if the opportunity cost rate is

(a) 4 percent,

(b) 8 percent,

(c) 10 percent.

Why does the PV decrease as the opportunity cost increases?

AnnuityAn 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,... Opportunity Cost

Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...

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