What is the present value of the following payment stream,discounted at 8% annually: $1,000 at the end of year 1,$2,000 at the end of year 2,and $3,000 at the end of year 3?
A) $5,022.11
B) $5,144.03
C) $5,423.87
D) $5,520.00

Question

Quizplus · Accepted Answer

To find the present value of the payment stream, we need to discount each payment to its present value and then add them up. Using the formula for present value of a single payment, we can calculate the present value of each payment:

PV of $1,000 at the end of year 1 = $1,000 / (1 + 0.08)^1 = $925.93
PV of $2,000 at the end of year 2 = $2,000 / (1 + 0.08)^2 = $1,735.54
PV of $3,000 at the end of year 3 = $3,000 / (1 + 0.08)^3 = $2,360.64

Adding up the present values, we get:

PV = $925.93 + $1,735.54 + $2,360.64 = $5,022.11

Therefore, the best choice is A.

What Is the Present Value of the Following Payment Stream,discounted