You have an opportunity to make an investment that will pay $100 at the end of the first year, $400 at the end of the second year, ?

 $400 at the end of the third year, $400 at the end of the fourth year, and $300 at the end of the fifth year 

a. Find the present value if the interest rate is 8 percent.  

b. What would happen to the present value of this stream of cash flows if the interest rate were 0 percent?

1 Answer

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  • fcas80
    Lv 7
    5 months ago

    PV = 100/1.08 + 400/1.08^2 + 400/1.08^3 + 400/1.08^4 + 300/1.08^5 = 1251.25

    PV = 100/1.00 + 400/1.00^2 + 400/1.00^3 + 400/1.00^4 + 300/1.00^5 = 1600

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