What is the present value of $500 per year, at a discount rate of 8.25 percent, if the first payment is received 8 years from now and the last payment is received 18 years from now?   Question 4 options:   $2,126   $1,944   $1,761   $2,166   $2,025

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
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What is the present value of $500 per year, at a discount rate of 8.25 percent, if the first payment is received 8 years from now and the last payment is received 18 years from now?
 

Question 4 options:

 
$2,126
 
$1,944
 
$1,761
 
$2,166
 
$2,025
Expert Solution
Step 1

Present Value:

  • It represents the present or current worth of the expected future cash flows.
  • The present value is estimated by discounting the expected future cash flows over the specified period by an appropriate interest rate.

 

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