Investment #1 pays you $100 at the end of each year for the next 10 years....
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Investment #1 pays you $100 at the end of each year for the next 10 years. Investment #2 pays you nothing for the first four years, and then $200 at the end of each year for the next six years. (a) Calculate the present value of each investment if the interest rate is 5%. Which one has a higher present value? (b) Which investment has the greater present value at an interest rate of 15%? Investment #1 pays you $100 at the end of each year for the next 10 years. Investment #2 pays you nothing for the first four years, and then $200 at the end of each year for the next six years. (a) Calculate the present value of each investment if the interest rate is 5%. Which one has a higher present value? (b) Which investment has the greater present value at an interest rate of 15%?
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To calculate the present value of each investment we need to discount the future cash flows to their ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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