For the cash flows shown, calculate the equivalent annual worth in years 1 through 4 at an interest rate of 10% per year. What is the present worth of a $50,000 municipal bond that has an interest rate of 4% per year, payablequarterly? The bond matures in 15 years, and the market interest rate is 8% per year, compoundedquarterly. Year134Cash Flow, $ 250,000275,000300,000325,000375,000

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Year 1 2 3 4 Cash Flow, $ 250,000 275,000 300,000 325,000 375,000

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Chapter1: Making Economics Decisions

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Question

For the cash flows shown, calculate the equivalent annual worth in years 1 through 4 at an interest rate of 10% per year.

What is the present worth of a $50,000 municipal bond that has an interest rate of 4% per year, payable
quarterly? The bond matures in 15 years, and the market interest rate is 8% per year, compounded
quarterly.

Year
1
3
4
Cash Flow, $ 250,000
275,000
300,000
325,000
375,000

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