[Steps Shown] (2.5 Points) An investment will pay $5,000 per year for 10 years, with the first payment occurring one year from today. If the interest rate
Question: (2.5 Points) An investment will pay $5,000 per year for 10 years, with the first payment occurring one year from today.
- If the interest rate is 6%, what is the value of this investment today?
- What would the value of the investment be if the $5,000 annual cash flow lasts 20 years (and the interest rate is still 6%)?
- How come the value of the investment IS NOT twice as much in part B as compared to part A? (After all, you will receive double the amount of cash over the 20 year annuity: 5000 X 20 vs. 5000 X 10).
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