Suppose that over the next 10 years, you are to receive monthly cash payments of $500 beginning
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Suppose that over the next 10 years, you are to receive monthly cash payments of $500 beginning one month from today. In addition, you must pay out $1,000 at the end of years 3 and 4 (you will still be receiving $500 as you are paying out the $1,000). Assume you can earn a 7 percent return over the entire 10-year horizon.Ignoring taxes and inflation, answer the following questions.
- Compute the present value of all the cash flows.Clearly show all supporting computations.
- Compute the future value of all the cash flows as of the end of year 10. Clearly show all supporting computations.
- Show that by discounting the future value at t=10 you arrive at the present value you computed in part a. Clearly show all supporting computations.
Related Book For
Contemporary Business Mathematics with Canadian Applications
ISBN: 978-0133052312
10th edition
Authors: S. A. Hummelbrunner, Kelly Halliday, K. Suzanne Coombs
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