A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever."Calculate the present value of your payments to the bank if the interest rate is 6%.Note: Do not round intermediate calculations. Round your answer to 2 decimal places.What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is 6%?Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

Using a proper discount rate, a measure known as the present value (PV) can be used to determine…

Answered: A local bank advertises the following…

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Interest, Rent, And Profit

Section: Chapter Questions

Problem 1WNG

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A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever."

Calculate the present value of your payments to the bank if the interest rate is 6%.

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is 6%?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

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