In: Finance
a. What is the present value of end-of-year cash flows of $7,000 per year, with the first cash flow received five years from today and the last one 40 years from today? Assume interest rate of 10%.
b. What is the value of a 30-year annuity that pays $1250 a year? The annuity’s first payment will be received on year 11. Also, assume that the annual interest rate is 6 percent for years 1 through 10 and 7 percent hereafter.
PV = CF Flow * PVF
Here those Cashflows are there from Year 5
OPtion 4 is Correct
Part B:
PVF is combination of Two, CFs are discounted till 10 years @7% & for first 10 Year @6%
OPtion 5 is correct.