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Q: Finance ( Answered,   0 Comments )
Subject: Finance
Category: Business and Money > Finance
Asked by: tigerfan28-ga
List Price: $3.00
Posted: 10 Oct 2005 09:16 PDT
Expires: 09 Nov 2005 08:16 PST
Question ID: 578496
I need help with the following problem relating to Present Values- 
Compute the present value of a $100 cash flow for the following
combinations of discount rates and times:
A. r=8% t=10 years
B. r =8% t=20 yrs
C. r=4% t=10 yrs
D. r=4% t=20 yrs
Subject: Re: Finance
Answered By: weisstho-ga on 10 Oct 2005 10:16 PDT
Dear Fan,

Here is a QUICK Answer:

Let's assume that we are talking about calendar years and we are
sitting there on January 1st asking this question. The answer depends
on whether the $100 payments are received on January 1, meaning today,
or whether the money is received on December 31st.

The payment received on January 1 of each year is a "beginning annuity."

The payment received on December 31 of each year is an "ending annuity."

Most calculators assume that you are calculating for an ending annuity. 

A.	8%	10	$671.01
B.	8%	20	$981.81
C.	4%	10	$811.09
D.	4%	20	$1,359.03

A.	8%	10	$724.69
B.	8%	20	$1,060.36
C.	4%	10	$843.53
D.	4%	20	$1,413.39

Here is a website from Duke University that explains some of the math:

Frankly, I just plugged the variables (time, rate, and payment) into
my trusty Hewlett-Packard 12C calculator.

Good enough?

If you need help making the formulas work from the Duke site, please
let me know by clicking the CLARIFICATION button.


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