00:01
So, here in a question we need to tell that this deal is fair or not.
00:09
So, for this it means the present value of cash flow received after 10 years is equal to the present value of cash flow paid out during the first 10 years.
00:17
So, let's calculate the present value of cash flow.
00:21
So, here pv is equals to pmt divided by r.
00:27
Now, when we talk about the present value which is where pv is equals to pmt multiply by 1 minus 1 plus r to the power minus n divided by r.
00:44
So, here when we talk about the pmt divided by r.
00:51
So, this is equals to pmt as pv is equals to this.
00:57
So, pmt multiply by 1 minus 1 plus r to the power minus n divided by r.
01:07
So, here now we cancel out the pmt.
01:11
So, and r from both sides.
01:13
So, we get when we cancel out this.
01:15
So, we got 1 is equals to 1 minus 1 plus r to the power minus n...