Use the Present Value of $ 1 table (Appendix 12A,

Use the Present Value of $ 1 table (Appendix 12A, Table A) to determine the present value of $ 1 received one year from now. Assume a 10% interest rate. Use the same table to find the present value of $ 1 received two years from now. Continue this process for a total of five years.
a. What is the total present value of the cash flows received over the five- year period?
b. Could you characterize this stream of cash flows as an annuity? Why or why not?
c. Use the Present Value of Annuity of $ 1 table (Appendix 12A, Table B) to determine the present value of the same stream of cash flows. Compare your results to your ­answer in Part A.
d. Explain your findings.

Annuity
An 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,...

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