An investor expects to receive $2,000 each year for the next five years, with the first...

An investor expects to receive $2,000 each year for the next five years, with the first payment beginning at the end of the year. What is the present value of the these payments if the interest rate is expected to be 5% for years 1-3 and 8% thereafter?

Expert Solution

Present values of these payment is $8528.

Firstly the payment of 4th & 5th year is discounted at 8% to 3rd Year and it is discounted to begining@ 5%

Then, payment of 1st, 2nd & 3rd year is discounted at 5% to begining.

Detailed calculation has been attached here :-

jeff jeffy answered 1 year ago

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