Discussion
An analyst uses \( (P/A, i, 5) \) for a series of five payments beginning at the end of year one and reports the answer as the value at the end of year one. The error is that the value belongs at
Answer: B
Correct answer: time zero
The series present worth factor places its result one period before the first payment. With the first payment at the end of year one, that period is time zero, so the answer is already the present worth and no further discounting is needed - but neither may it be reported as a value at the end of year one, which would overstate it by a year’s interest.
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