Your favorite aunty has agreed to contribute towards funding your retirement. She will start with a contribution of $6,000 today (that is, end of year 0) but this amount will then decline at a constant rate of 3% p.a. over the foreseeable future. If the interest rate appropriate for valuing your aunty's contribution is 12% p.a. its present value today is closest to: a) $38,800. b) $44,800. c) $56,000. d) $70,667.
Your favorite aunty has agreed to contribute towards funding your retirement. She will start with a contribution of $6,000 today (that is, end of year 0) but this amount will then decline at a constant rate of 3% p.a. over the foreseeable future. If the interest rate appropriate for valuing your aunty's contribution is 12% p.a. its present value today is closest to: a) $38,800. b) $44,800. c) $56,000. d) $70,667.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Your favorite aunty has agreed to contribute
towards funding your retirement. She will start
with a contribution of $6,000 today (that is, end
of year 0) but this amount will then decline at a
constant rate of 3% p.a. over the foreseeable
future. If the interest rate appropriate for
valuing your aunty's contribution is 12% p.a. its
present value today is closest to:
a) $38,800.
b) $44,800.
c) $56,000.
d) $70,667.
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