Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:You have lent your friend $10500. Your friend offers you
the following instead of paying the $10500 now.
End of year
Cash flow
1
3200
2
2000
650
4
600
What is the present value of your friend's payments?
(Using an opportunity cost of capital of 7 percent)
Expert Solution
Step 1
Present Value is the discounted future value at a given discount rate.
Present Value = Cash flows/(1+discount rate)EOY
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