Question #114158

Given an interest rate of 4.2 percent per year, what is the value at date t = 7 of a perpetual stream of $2,600 payments that begins at date t = 15? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Expert's answer

1.get the value of eternity in year 15

"\\frac{2600}{0.042}=61904.76"

2.bring this value to the required year using discounting

15-7=8

"61904.76\\times(\\frac{1}{(1+0.042)^8})=44543.29"

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