Discussion
Five annual receipts of 1000, the first a year hence, are worth at 10 per cent a present sum of about
Answer: B
Correct answer: 3791
\[ P = 1000 \times \frac{1 - (1.10)^{-5}}{0.10} = 1000 \times 3.791 = 3791. \] The five payments total 5000 and are worth 3791 today, the difference being the interest the money would have earned in the meantime. The value belongs at time zero, one period before the first payment.
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