Solutions to Chapter 1

This problem can be approached in two steps. First, find the present value of the $10,000, 10-year annuity as of year 3, when the first payment is exactly one year away (and is therefore an ordinary annuity). Then discount the value back to today. Using a financial calculator, enter: PMT = 10,000; FV = 0; n = 10; i = 5%, and compute PV3 ... ................
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