Answer:
A.) $900 received one year from now.
$841.12
B.) $900 received 10 years from now.
$457.51
C.) $900 received each year beginning 1 year from now and ending in 10 years.
$6321.22
D.) $900 received each year beginning 1 year from now and continuing forever.
$12,857.14
Explanation:
Interest Rate = 7%
A.)
Cash flow = $900
Period = 1 year
PV = FV / ( 1 + r )^n
PV = $900 / ( 1 + 0.07 )^1
PV = $900 / 1.07
PV = $841.12
B.)
Cash flow = $900
Period = 10 year
PV = FV / ( 1 + r )^n
PV = $900 / ( 1 + 0.07 )^10
PV = $900 / 1.96715
PV = $457.51
C.)
Cash flow = $900
Period = 10 year
P = [ r x PV / 1 - ( 1 + r )-n]
$900 = [ 0.07 x PV / 1 - ( 1 + 0.07 )-10]
$900 = [ 0.07 x PV / 1 - ( 1.07 )-10]
PV = ( $900 x 0.491651 ) / 0.07
PV = $6321.22
D.)
Cash flow = $900
Period = 10 year
PV = Pmt / i
PV = $900 / 0.07
PV = $12,857.14
