If you were to receive $100 per year for the next 10 years, starting today, and the discount rate applicable is 9% per year, what's the value of this stream of cash flows to you?
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A. B. C. D.Explanation
Since you receive one payment today, the stream of cash flow equals $100 plus a 9-year ordinary annuity. The value of the annuity today = (100/0.09)*(1 - 1/
(1.09^9)) = 600. Thus, the total value to you is 600+100 = 700.