Question

The appropriate discount rate for the following cash flows Is 11 percent compounded quarterly. Year Cash Flow $1,000 500 0 1.400 2 4 Required: What is the present value of the cash flows? O $2.206.74 O $2.250.88 O $2.228.94 O $478.55 O$2,162.61

Answer 1

		Rate = R = 11%	Present value for CF = Df x CF
Year	Cash flow = CF	Discount factor = Df = 1/(1+R)^Year	CF
1	$1,000	0.900901	$900.90
2	$500	0.811622	$405.81
3	$0	0.731191	$0.00
4	$1,400	0.658731	$922.22
		Present Value of cash flows	$2,228.94

Hence, third or 3^rd option is correct i.e $2,228.94