starting 1 year from today, you will get 20 annual payments of $1,000,000. But to get your money today you make a deal stating that you will get all of those future payments today assuming the future inflation rate is 10% ($1 a year from now is worth .90, $2 a year from now is worth (.90)2 in general, n dollars in 1 year is worth (.90). How much will you get paid NOW? How much will you get paid if the payments go on forever instead of 20 years from now?

starting 1 year from today, you will get 20 annual payments of $1,000,000. But to get your money today you make a deal stating that you will get all of those future payments today assuming the future inflation rate is 10% ($1 a year from now is worth .90, $2 a year from now is worth (.90)2 in general, n dollars in 1 year is worth (.90). How much will you get paid NOW? How much will you get paid if the payments go on forever instead of 20 years from now?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 6P

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