You've bought an inflation-adjusted annuity to give you a constant real income during your retirement...
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You've bought an inflation-adjusted annuity to give you a constant real income during your retirement years. The annuity will make 20 annual payments. The first payment of $80,000 will occur one year from now, and annual payments will increase at the rate of inflation, 4%, for 19 years and then stop. The interest rate is 8%.
What is the present value of these cash flows?
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