Assignment Discounting

Task

The following series of cash flows is given:

t0	t1	t2	t3	t4
100	100	100	100	100

Calculate the present value (PV) if the interest rate is

1. 10%
2. 35%

Solution

1. PV = 100 *1,1^0+ 100*1,1^-1+100*1,1^-2+100*1,1^-3+100*1,1^-4 = 416.99
2. PV = 100*1,35^0 + 100*1,35^-1+100*1, 35^-2+100*1, 35^-3+100*1, 35^-4 = 299.69