You are offered a court settlement in the following terms: you will receive 5 equal payments...

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You are offered a court settlement in the following terms: you will receive 5 equal payments...

You are offered a court settlement in the following terms: you will receive 5 equal payments of $677 each every year, with the first payment being made 5 years from now. The current annual interest rate is 7%. Assume yearly compounding. What is this settlement worth in present value terms?

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Answer 1

Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=677/1.07^5+677/1.07^6+.........+677/1.07^9

=677[1/1.07^5+1/1.07^6+..........+1/1.07^9]

=677*3.128020992

=$2117.67(Approx).

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Answer 2

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You are offered a court settlement in the following terms: you will receive 5 equal payments...

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You are offered a court settlement in the following terms: you will receive 9 equal payments...

You are offered a court settlement in the following terms: you will receive 9 equal payments...