Suppose that you will receive annual payments of $10,000 for a period of 10 years. The first payment will be made 4 years from now. If the interest rate is 5%, what is the present value of this stream of payments?

The present value of this stream of payments is $41,758.

Explanation:

Monthly Payment = P = 10000

Interest rat = i = 0.05

Number of years = n = 10 years

Compounding Years = 10 - 4 = 6 years

PV of stream = ( 1 + r )^-4 x [P ( 1 - ((( 1 + i )^-n ) / i))]

PV of stream = ( 1 + 0.05 )^-4 x [10000(  1 - ((( 1 + 0.05 )^-6 ) / 0.05))]

PV of stream = 0.8227 x 50756.92

PV of stream = $41,758

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%