Question

roblem: Time Value of Money For each of the following questions, assume a discount rate of 5%.

a) What is the value today of $100 received at the end of each of the next five years?

b) What is the value in five years of five annual payments of $100, beginning one year from today?

c) What is the value today of $10 yearly payments, beginning in one year, continuing forever?

d) What is the value in five years of $10 yearly payments, beginning in one year, continuing forever?

Answer 1

a) What is the value today of $100 received at the end of each of the next five years

=100/(1+5%)^1+100/(1+5%)^2+100/(1+5%)^3+100/(1+5%)^4+100/(1+5%)^5

=432.95

b) What is the value in five years of five annual payments of $100, beginning one year from today

=100*(1+5%)^4+100*(1+5%)^3+100*(1+5%)^2+100*(1+5%)^1+100*(1+5%)^0

=552.56

c)

What is the value today of $10 yearly payments, beginning in one year, continuing forever

=10/5%=200

d) What is the value in five years of $10 yearly payments, beginning in one year, continuing forever

=(10/5%)*(1+5%)^5

=255.26

the above is answer..