You are offered the opportunity to buy the following stream of cash flows: $1000 in years 1

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You are offered the opportunity to buy the following stream of cash flows: $1000 in years 1 through 10 and $2000 in years 11 through 20.

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(a) Assuming your effective annual rate of return is 10%, what is the most you would be willing to pay for this annuity?

(b) What is the most that you would be willing to pay if all the payments were shifted forward one year (so that you receive payments in years 0 through 19)?

Related Book For answer-question

Introduction to Corporate Finance What Companies Do

ISBN: 978-1111222284

3rd edition

Authors: John Graham, Scott Smart

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Posted Date: May 05, 2023 08:00 AM

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You are offered the opportunity to buy the following stream of cash flows: $1000 in years 1

Question:

Expert Answer:

a To calculate the present value of the annuity we need to find the present v... View the full answer

Introduction to Corporate Finance What Companies Do

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