What is the present value of a stream of annual end-of-the-year annuity cash flows if the discount rate is 0%,and the cash flows of $50 last for 20 years?
A)Less than $1,000
B)Exactly $1,000
C)More than $1,000
D)This question cannot be answered because we have an interest rate of 0.0%.

Question

Quizplus · Accepted Answer

When the discount rate is 0%, the present value of an annuity is simply the sum of the annual cash flows, which in this case is $50 x 20 years = $1,000. Therefore, the correct choice is B.

What Is the Present Value of a Stream of Annual