You are in negotiations to make a 7-year loan of $ 45,000 to Deville Corporation. To repay you, DeVille will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. You are confident the payments will be made, since DeVille is essentially riskless. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X? Select the correct answer. a. $12,373.41 b. $12, 351.01 c. $ 12,339.81 d. $12,384.61 e. $12, 362.21
You are in negotiations to make a 7-year loan of $ 45,000 to Deville Corporation. To repay you, DeVille will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. You are confident the payments will be made, since DeVille is essentially riskless. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X? Select the correct answer. a. $12,373.41 b. $12, 351.01 c. $ 12,339.81 d. $12,384.61 e. $12, 362.21
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
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Transcribed Image Text:You are in negotiations to make a 7-year loan of $
45,000 to DeVille Corporation. To repay you, DeVille will
pay $2,500 at the end of Year 1, $5,000 at the end of
Year 2, and $7,500 at the end of Year 3, plus a fixed
but currently unspecified cash flow, X, at the end of
each year from Year 4 through Year 7. You are
confident the payments will be made, since DeVille is
essentially riskless. You regard 8% as an appropriate
rate of return on a low risk but illiquid 7-year loan.
What cash flow must the investment provide at the end
of each of the final 4 years, that is, what is X? Select
the correct answer. a. $12,373.41 b. $12, 351.01 c. $
12, 339.81 d. $12,384.61 e. $12, 362.21
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