## Question

###### Helpp 4. 7 points. You are offered an investment which will pay you $1000 in one...

helpp

4. 7 points. You are offered an investment which will pay you $1000 in one year, $2000 in three years and $2500 in four years. How much are you willing to pay for this investment? Interest rate = 3.75%

## Answers

The amount to be paid for investment is present value of future payment received on investment YearCash flowDiscount factor @ 3.75%Present value1 $1,000 0.96386 $963.86 3 $2,000 0.89544 $1,790.88 4 $2,500 0.86307 $2,157.68 $4,912.41 Thus, one would be willing to pay $4,912.31 for investment

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