You are offered and investment opportunity that will produce continuous income at a constant rate of 5000 dollars/year for 10 years. If the annual interest rate is 3%, continuously compounded, what is the present value of this income stream?
Added by Jean Q.
Step 1
We can use the formula for the present value of a continuous income stream: PV = C / r where PV is the present value, C is the constant income rate, and r is the interest rate. Plugging in the values, we get: PV = 5000 / 0.03 PV = 166,666.67 Show more…
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