Consider an investment that returns $10,000 a year for 5 years. That is at the end...
Consider an investment that returns $10,000 a year for 5 years. That is at the end of each year, for five years, it pays $10,000. Assuming the alternative is an annual interest rate of 2%, what is the present value of this income stream?
Homework Answers
Return at the end of every year = $10,000
No. Of years = 5
Annual interest rate = 2%
What is the present value?
Present Value = A(P/A, 2%, 5)
Present Value = $10,000(P/A, 2%,5)
Present Value = $10,000(4.7135)=$47,135
Present Value =$47,135
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