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Assume that you can borrow from the bank at a 6% interest rate compounded annually. What is the present value of a 20-year annuity (ie
Assume that you can borrow from the bank at a 6% interest rate compounded annually. What is the present value of a 20-year annuity (ie an annuity that will deliver 20 payments) that pays $100 per year, if you are to receive the first payment in exactly 16 years? (Hint: Use a timeline to help yourself with the timing of the payments.) -] 1 *[4-(1.06)-20 0.06 $100* (1.06.15 -] 11-(1.06)-16 $100 0.06 -] $100 *[4-(1.061-36 0.06 $100 * (1.06 -(1.1 0.06 $100 * -] 4 -(1.06)-36 $100 * 0.06 -20 -(1.06) [11 $100 * 0.06
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