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WITCHER [35]
2 years ago
13

You are due to receive a lump-sum payment of $1,350 in four years and an additional lump-sum payment of $1,450 in five years. As

suming a discount rate of 2.0 percent interest, what would be the value of the payments today
Business
1 answer:
FrozenT [24]2 years ago
8 0

Answer:

2560.50

Explanation:

For bond valuation, the investor would be willing to pay, at the most, the present value of the future income stream discounted at 2%. Thus, the value of the bond can be determined as follows:

Years  1 2 3 4 5 Total  

Principal              1,350 1,450 2,800  

Interest  0    0      0      0       0        0  

Total inflow 0 0  1,350 1,450 2,800  

[email protected]% 0 0 0  1,247 1,313 2,561

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