# 1.02 1.02 1.02 1.02 7T-. .T 1.0200

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Question
Expert Solution
Step 1

Formula for PV calculation is given below:

PV= CF/(1+i)^n

Below is the question asked which is till infinity. We can use the present value table and solve the same.

Since the rate is 2%, one needs to look at the 3rd year for the correct amount, so at 2% for the third year is .9423, =1/09423= 1.061233

Simlarly for all the 1/(1.02)^5; one needs to see the correct amount under 5th year for 2%; I.e. .9057=1/.9057= 1.104118

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