Present value: Present value refers to the present worth of the money that is received in future in a lump sum or as series of cash flows at a specified interest rate. When these future sums of money are discounted at a higher rate, the present value of the future cash flows gets lower. Present value of an amount = Future value ( 1 + interest rate ) number of periods Annuity: An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time. To determine: The amount that C borrows.

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Chapter 5, Problem 5.8BE

To determine

Present value:

Present value refers to the present worth of the money that is received in future in a lump sum or as series of cash flows at a specified interest rate. When these future sums of money are discounted at a higher rate, the present value of the future cash flows gets lower.

Present value of an amount = Future value(1 + interest rate)number of periods

Annuity:

An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time.

To determine: The amount that C borrows.

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