What is the value of Goldman offer

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Question - Goldman gave you an offer for a payment stream, which you now need to evaluate in detail. Your alternative to this investment is an investment that will generate a 5.7% annually. Goldman's offer: They will give you $170 next year. For every year after that they will increase the amount they give you by 3.3% (each year) and will do so until the end of 20 years from now.  

a. What is the value of Goldman's offer?

b. If you replicate this offer by depositing the money you calculated in part (a) in an account, and earning your investment rate (withdrawing each payment right before the end of each year), how much will you have in that account at the end of year 2, and at the end of year 10?

Reference no: EM133020929

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