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Calculate the present value of income streams

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You're 20 years old and you're trying to decide which career path to take based on the future expected streams of income. Occupation A has you earning $15,000 per year for the next 5 years, then $25,000 per year for the next 30 years. Occupation B has you earning only $1,000 per year for 4 years, then $10,000 per year for 6 years, and finally $50,000 per year for the next 25 years. You plan to retire when you are 55.

a. Write out a formula to calculate the present value of each of these income streams, assuming the interest rate is r. (Hint: you can write "..." instead of all 35 terms when its obvious the next term in sequence)

b. What occupation would be better if the interest rate was zero? If it was extremely high?

Reference no: EM131299217

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