You will receive $500 each year starting today (t=0) and you will receive your last payment...
You will receive $500 each year starting today (t=0) and you will receive your last payment three years from today (t=3). If the interest rate is 5% p.a., what is the present value today of these cash flows?
Homework Answers
Answer:
cash flow
| Year t | Cash flow |
| 0 | 500 |
| 1 | 500 |
| 2 | 500 |
| 3 | 500 |
CF= Cash flow
r =interest rate =5%
t= year of cash flow
PV=500/(1+5%)^0+500/(1+5%)^1+500/(1+5%)^2+500/(1+5%)^3
PV=$1861.62
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