tjglodowski7694 tjglodowski7694

20-02-2020
Business

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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. Assuming a discount rate of 2.0 percent interest, what would be the value of the payments today

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OvaisKhan OvaisKhan

21-02-2020

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

pv@2% 0 0 0 1,247 1,313 2,561

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