Four years from now you will receive the ﬁrst of seven annual $10,000 payments. The current interest rate is 6%, but by the beginning of year 4, the rate will rise to 8%. What is the present value
Of this cash ﬂow stream?

Question

Quizplus · Accepted Answer

The present value of the cash flow stream is calculated by discounting each of the $10,000 payments back to the present value using the appropriate interest rates. The first three payments are discounted at 6%, and the remaining four payments are discounted at 8%. The correct calculation results in a present value of $43,713.69.

Four Years from Now You Will Receive the ﬁRst of Seven