Midterm 1 time shifting and present worth

Consider an asset that pays $10,000 in month one, but decreases by $100 per month for 20 months at which point you will receive $8,000 per month. The $8,000 payments will continue from months 21-30, another 10 months. Monthly discount rate is 2%

What is the present worth of all of these payments?

First, let's examine the problem graphically:

deposit.gif

Next, let's set up the problem in factor notation:

$10,000(P/A, 2%, 20)-$100(P/G, 2%,20)+$8,000(P/A, 2%, 10)/(1+.02)^20

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