Suppose that you take out a $250,000 house mortgage from your local savings bank. The bank requires you to repay the mortgage in equal annual installments over the next 30 years. It must therefore set the annual payments so that they have a present value of $250,000.Calculate the annual payment that the mortgage bank should claim to have the present value of $250000. Interest rate is 12 %.
The continuously compounded interest rate is 12%.
What is the PV of a continuous stream of cash flows, amounting to
$2,000 per year, starting immediately and continuing for 15 years?
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