# Fight Finance

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What is the NPV of the following series of cash flows when the discount rate is 5% given as an effective annual rate?

The first payment of \$10 is in 4 years, followed by payments every 6 months forever after that which shrink by 2% every 6 months. That is, the growth rate every 6 months is actually negative 2%, given as an effective 6 month rate. So the payment at $t=4.5$ years will be $10(1-0.02)^1=9.80$, and so on.