1.Suppose that you will receive annual payments of $14,000 for a period of 10 years. The...

1.Suppose that you will receive annual payments of $14,000 for a period of 10 years. The first payment will be made 5 years from now. If the interest rate is 5%, what is the present value of this stream of payments?

a.What is the present value?

2.A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a discount of 8% from the purchase price. Assume the product sells for $100.

a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 5 percent.

b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year.

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 month ago

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