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

Question

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] · Answer 1 · 2023-11-05T10:03:15+03:00

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