6. Suppose there will be a payment of $100,000 every year, for two years, startingnext year. If the annual interest rate is 1%this year, 2% from next year on and inflationrate is O during the entire time period, howmuch is the above income stream worthright now? Please show your work andexplain your reasoning.a. $197,039.5b. $195,126.8c. $194,156.0d. $ 196,078.4

Present Value of Annuity: It represents the present worth of the future annual cash flows and is…

Answered: rate is 0 during the entire time…

rate is 0 during the entire time period, how much is the above income stream worth right now? Please show your work and explain your reasoning.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 9PROB

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Question

Suppose there will be a payment of $
100,000 every year, for two years, starting
next year. If the annual interest rate is 1%
this year, 2% from next year on and inflation
rate is O during the entire time period, how
much is the above income stream worth
right now? Please show your work and
explain your reasoning.
a. $197,039.5
b. $195,126.8
c. $194,156.0
d. $ 196,078.4

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