Assuming a discount rate of 6%, what is the present value of 100,000 per year for 12 years if the payments occur at the beginning of each period? Question 2 options: $888,687 $729,394 $804,849 $838,384 $789,423
Assuming a discount rate of 6%, what is the present value of 100,000 per year for 12 years if the payments occur at the beginning of each period? Question 2 options: $888,687 $729,394 $804,849 $838,384 $789,423
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Assuming a discount rate of 6%, what is the present value of 100,000 per year for 12 years if the payments occur at the beginning of each period?
Question 2 options:
|
$888,687
|
|
$729,394
|
|
$804,849
|
|
$838,384
|
|
$789,423
|
Expert Solution
Step 1
The payments occur at the beginning of each period is called an annuity due.
Present value of annuity due = Annuity * PVAD of $1
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