Find its present value and price of a bond paying a coupon

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Question: Consider a stream of constant cash flows Ft = C, for t = 1,..., T. From given Example, we know how to find its present value at time t = 0. Now imagine that these cash flows are the amount you invest to build your pension wealth; the current amount of wealth is invested at an interest rate r, which we assume fixed and constant over time. How can you compute your future pension wealth at time T?

Example: To find the price of a bond paying a coupon C per year, we plug a - 1/(1 + r) into Eq. (2.24):

Reference no: EM131447940

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