Michelle has won a prize that will pay her $1000 per year, starting one year from today, for 15 years. Inflation is expected to be 3% per year for the next 15 years, and her interest rate is 5% per year. What is the present value of this prize today? (Treat the 3% inflation as a negative 8, thus g = -3%, and i is 5%)

Michelle has won a prize that will pay her $1000 per year, starting one year from today, for 15 years. Inflation is expected to be 3% per year for the next 15 years, and her interest rate is 5% per year. What is the present value of this prize today? (Treat the 3% inflation as a negative 8, thus g = -3%, and i is 5%)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter2: The One Lesson Of Business

Section: Chapter Questions

Problem 2.6IP

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