A tenant wants to lease a building for $50,000 per year. She signs a five-year rental agreement that states that she will pay $25,000 every six months for the next five years
Which of the following is the timeline for her rental payments, assuming she makes the first payment immediately?
A)
Date
(years) 0 1 2 3 4 5
Cash Flows
(thousands) -$50 -$50 -$50 -$50 -$50 -$50
B)
Date
(years) 0 1 2 3 4 5
Cash Flows
(thousands) $50 $50 $50 $50 $50 $50
C)
Date
(years) 0 1 2 3 4 5 6 3 1/2 4 4 1/2 5
Cash Flows
(thousands) $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25
D)
Date
(years) 0 1/2 1 1 1/2 2 2 1/2 3 3 1/2 4 4 1/2 5
Cash Flows
(thousands) -$25 -$25 -$25 -$25 -$25 -$25 -$25 -$25 -$25 -$25 0
Answer: D
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