Find the effective annual rate,
EAR = [1+i/m]^m - 1
i - nominal rate = 9%
m - no. of compounding periods per year =4
EAR = (1+0.09/4)^4 - 1 = 1.0225^4 - 1
= 1.093083 - 1 = 0.093083 = 9.3083%
Now find the sum of present value of individual cash flows:
PV = FV/(1+r)^n
PV - Present value
FV - Future value
r - Interest rate
n - no. of periods
Present value of cash flows = 860/(1+0.093083)^1 + 940/(1+0.093083)^2 + 0/(1+0.093083)^3 + 1530/(1+0.093083)^4
= 786.7653 + 786.72205 + 0 + 1071.71267 = 2645.1999
Present value of the given cash flows is $2645.20
=
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