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Suppose that you will receive annual payments of $10,000 for a period of 10 years. The first payment will be made 4 years from now. If the interest rate is 5%, what is the present value of this stream of payments?

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hyderali230

Answer:

The present value of this stream of payments is $41,758.

Explanation:

Monthly Payment = P = 10000

Interest rat = i = 0.05

Number of years = n = 10 years

Compounding Years = 10 - 4 = 6 years

PV of stream = ( 1 + r )^-4 x [P ( 1 - ((( 1 + i )^-n ) / i))]

PV of stream = ( 1 + 0.05 )^-4 x [10000(  1 - ((( 1 + 0.05 )^-6 ) / 0.05))]

PV of stream = 0.8227 x 50756.92

PV of stream = $41,758

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