An entrepreneur needs thousand of dollars to launch the global expansion of his software business. I have agreed to lend him the money today (n=0) at an interest rate of 15% compounded continuously. I required that the loan be repaid in eight annual payments starting at Year 3 with a $20K payment. Subsequent payments will decrease by $1K each year thereafter. (1) What is the present value of the money being borrowed? (2) Convert your Present Value to Annual Payment.   Answer: ieff = Blank 1 show in four decimal P0Total = $ Blank 2 A/P0Total = $ Blank 3

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.