Discussion
A series of 5 annual receipts of 10 000 beginning at the end of year 4, at 10 per cent, has a present worth at time zero of about
Answer: B
Correct answer: 28 480
The series present worth factor places its value one period before the first payment, so with the first receipt at the end of year four the value sits at the end of year three: \[ 10\,000 \times 3.791 = 37\,910 \ \text{at } t = 3. \] Discounting that back three years, \[ \frac{37\,910}{(1.10)^3} = \frac{37\,910}{1.331} = 28\,480. \] Forgetting the second step and reporting 37 910 is the classic error with a deferred series.
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