Answer to Question #181060 in Economics for Cally

Question

If Caroline’s investment were expected to yield an annual cash flow of GHS500 for each of the next ten years, assuming discount rate is 5%, (i) Determine the present value of her investment. (ii) Assuming that cash flows were only realised at the beginning of each period, determine the present value of the annuity due. 

Answer 1

i)

$$500\times(1+0.05)^{10}=814$$

ii)

$$814-500=314$$