Question: d escribe three ( 3 ) methods for calculating the value of an annuity of $ 1 0 0 per year for 5 years starting

d escribe three

(3)

methods for calculating the value of an annuity of $

100

per year for

5

years starting at t

1

using a

6 %

discount rate. What is the PV of this annuity?

Draw a clearly marked number line demonstrating how this annuity is the difference between two perpetuities and show your calculations. Generally speaking, what is the purpose of discounting future cash flows?

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