Answer to Question #255289 in Economics for Sera

Question

A yearly payment of 100, 000 pesos every end of each year starting at the end of 5 years for 10 years, with a down payment of 500, 000 pesos. Draw a cash flow.

Answer 1

If we want to know the present value of the flow of payments, then we should calculate the sum of discounted payments:

$PV = 500,000/(1 + i)^5 + 100,000/(1 + i)^6 + ... + 100,000/(1 + i)^{14}.$

But if we need to find the future value, then we should use the formula for the annuity.