Lenny D. answered • 07/25/19

Financial Professional with many years of Wall Street Experience

I can't understand all of your crazy symols. He has two choices, receive 1,295.05 per year for 10 yeatrs or receive 500 per year for 10 yearsd and get 10,000 back at maturity. Scheme B has more cash flows but they are back dated (15,000) in total .In scheme A he hets 12,950.50 but he gets it much sooner. at 5% interest, the 5% bond has the same present value as the 5% annuity