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An investment offers to pay $100 a year forever starting at the end of year 6. If the interest rate is 8%, what is the investment's value today?

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Solution 1

1. Break Down the Problem

To find the present value of an investment that pays $100 annually forever starting at the end of year 6, we will:

  1. Calculate the present value at year 5 (the time just before the first payment).
  2. Discount that present value back to today (year 0).

2. Relevant

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Knowee AI  is a powerful AI-powered study tool designed to help you to solve study problem.
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