An investment product will deliver cash flows of $27 today, another cash flow of $16 in...
An investment product will deliver cash flows of $27 today, another cash flow of $16 in one year, and a final cash flow of $27 in two years. Suppose your effective annual rate (EAR) is 6%. What is the most you are willing to pay for this product?
Homework Answers
| The most that can be paid for the product is the PV of the expected cash flows discounted at 6%. | |
| = 27+16/1.06+27/1.06^2 = | $ 66.12 |
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