Find the following values assuming regular, or ordinary, annuity:
a. The present value of $400 per year for ten years at 10 percent
b. The future value of $400 per year for ten years at 10 percent
c. The present value of $200 per year for five years at 5 percent
d. The future value of $200 per year for five years at 5 percent
9.6 Consider the following uneven cash flow stream:
Year Cashflow
0 $ 0
1 250
2 400
3 500
4 600
5 600
9.7 Consider another uneven cash flow stream:
Year Cash flow
0 $2,000
1 2,000
2 0
3 1,500
4 2,500
5 4,000
a. What is the present (Year 0) value of cash flow stream if the opportunity cost rate is 10 percent?
b. What is the future (Year 5) value of the cash flow stream if the cash flows are invested in an account that pays 10 percent annually?
9.9 Assume that you just won the $35 million in the Florida lottery, and hence the stae will pay you 20 annual payments of $1.75 million each beginning immediately. If the rate of return on securities of similar risk to the lottery earnings (e.g., the rate on 20-year U.S. Treasury bonds) is 6 percent, what is the present value of your winnings?
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