Consider the streams of income given in the following table: a. Find the present value of each income stream, using a discount rate of 4%, then repeat those calculations using a discount rate of 8%. b. Compare the calculated present values and discuss them in light of the fact that the undiscounted total income amounts to $14,000 each case. a. The present value of income stream A. using a discount rate of 4% is $' (Round to the nearest cent.). Data table Income Stream B End of Year $5,000 $4,000 $3,000 $2,000 $14,000 $2,000 $3,000 $4,000 $5,000 2 3 4. Total $14,000 (Click on the icon located on the top-right corner of the data
Consider the streams of income given in the following table: a. Find the present value of each income stream, using a discount rate of 4%, then repeat those calculations using a discount rate of 8%. b. Compare the calculated present values and discuss them in light of the fact that the undiscounted total income amounts to $14,000 each case. a. The present value of income stream A. using a discount rate of 4% is $' (Round to the nearest cent.). Data table Income Stream B End of Year $5,000 $4,000 $3,000 $2,000 $14,000 $2,000 $3,000 $4,000 $5,000 2 3 4. Total $14,000 (Click on the icon located on the top-right corner of the data
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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Transcribed Image Text:Consider the streams of income given in the following table:
a. Find the present value of each income stream, using a discount rate of 4%, then repeat those calculations using a discount rate of 8%.
b. Compare the calculated present values and discuss them in light of the fact that the undiscounted total income amounts to $14,000 in each case.
a. The present value of income stream A. using a discount rate of 4% is §.
(Round to the nearest cent)
Data table
Income Stream
End of Year
A
$5,000
$4,000
$3,000
$2,000
$2,000
$3,000
1
$4,000
4
$5,000
Total
$14,000
$14,000
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