Question 2.p.1: Exactly 15 years from now, Jones will start receiving a pens...
Exactly 15 years from now, Jones will start receiving a pension of $20,000 a year. The payments will continue forever. How much is the pension worth now, assuming that the appropriate discount rate is 0.10 per year?
The present value at time 14 is $200,000.
The present value at time 0 is
$200,000(1.10)^{-14} = $200,000(0.26333) = $52,666.
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