Just for clarification, what kind of interest? simple interest? compound interest?
A wants to pay 100000e cash for a house. And 42000 in the end of every year 10 years forward. B wants to pay 150000e cash and 59000 in the end of 5 years forward. Which is a better payment for the seller if we count with an yearly intrest of 5% ??
Can anyone show me how to calculate it?
The answer to a is:424300
Anyone could show to me how to get this answer???
B: Present Value at time 0 = 150,000 + 59,000 * [(1/1.05)+(1/1.05^2)+(1/1.05^3)+(1/1.05^4)+(1/1.05^5)] = 150,000 + 255,439.12 = 405,439.10
Therefore, A is the bigger present value to the seller, A wins.
For those who don't like series, here is the annuity formula: Annuity Immediate Present Value
See, I wasn't blowing smoke on PM.