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annuity question
Today is January 1, 2011. On January 1 of the years 2012 through 2021 you are to receive$50,000. If the cash flows are discounted at 10% a year, what is the present value of these cash flows as of today? (Give your answer to the nearest dollar).
is it 9 years or 10 years? Do u count 2011? Confused |
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There are 10 cash flows of 50K each, with the first one rolling in one year from today, the second one arrives 2 years from today, and... the last one is received 10 years from today.
For this one you could therefore use the basic "PV of an ordinary annuity" formula--"ordinary" because the first cash flow occurs one period from today. For n in the formula, you'd use 10, corresponding to the number of cash flows. |
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