Calculation Of Present Value Of An Investment

Question

Suppose $1000 is invested at the end of each year in perpetuity. The interest rate is 8% per
year.

(a) Calculate the present value (PV) of the investment to the nearest cent after: (i) 1 year (ii) 10 years (iii) 50 years (iv) 100 years.

(b) Do the present values calculated in (a) appear to be approaching a limiting value as the number of years increase? If so, what is this value? Explain your answer.

Summary

The question belongs to Finance and it discusses about calculation of present value of an investment for 1 year, 10 years, 50 years and 100 years and discuses about the limiting value of present value as the number of years increase.

Total Word Count 131