Ryan Campbell has invested in a fund that will provide him a cash flow of $11,700 for the next 20 years. If his opportunity cost is 8.5 percent, what is the present value of this cash flow stream? (Round to the nearest dollar.)

The correct answer is $110,721.

Explanation:

According to the Scenario, the given data are as follows

Payment (pmt) = $11,700

Time period (t) = 20 years

Rate of interest (r) = 8.5%

So, we can calculate the present value of this cash flow stream by using following formula:

PV = PMT * ((1 - (1+r) ^ (-t)) / r

So, by putting the value, we get

= $11,700 * ((1 - (1 + 0.085) ^-20)) / 0.085

= $11,700 * (1 - 0.19561638835) / 0.085

= 110721.0383094706

= $110,721

Hence, the present value of this cash flow stream is $110,721.