What is the present value of a stream of annual end-of-the-year annuity cash flows if the discount rate is 0%, and the cash flows of $50 last for 20 years?
A) Less than $1,000
B) Exactly $1,000
C) More than $1,000
D) This question cannot be answered because we have an interest rate of 0.0%.
Answer: B
Explanation: B) Since the interest rate is 0.0%, the PV is simply the cash flow of $50 times the number of periods, 20 = $1,000.
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