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Calculate the net present value of a car down payment.

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Calculate the present value of:

a. A car down payment of $5,000 that will be required in five years, assuming an interest rate of 10%.

b. A lottery prize of $10 million to be paid at the rate of $500,000 per year for 20 years, assuming an interest rate of 7%.

What happens to the above calculations when the interest rate is 0%?

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Solution Summary

Solution explains how to calculate the given present value problems

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Calculate the present value of: 
a. A car down payment of $5,000 that will be required in five years, assuming an interest rate of 10%. 

Present value= Future value /(1+rate of interest)^ duration

=5000/(1+10%)^5
$3,104.61

b. A lottery prize of $10 million to be paid at the rate of $500,000 per year ...

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