You are offered an investment that will pay $1,120 at the end of year 1, pay...
You are offered an investment that will pay $1,120 at the end of year 1, pay $1,460 at the end of year 2, and pay $1,694 at the end of year 3. If you can earn 9% on similar investments, what is the most you would pay for this investment?
Homework Answers
Present value = Future value/(1+i)^n
i = interest rate per period
n= number of periods
=>
Present value = 1120/1.09 + 1460/1.09^2 + 1694/1.09^3
= 3564.46
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