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Evelyn is planning on making an investment that will generate cash flows of $1,000 per quarter...

Evelyn is planning on making an investment that will generate cash flows of $1,000 per quarter for 3 years with the first payment occurring immediately. Similar risk investments are offering a return of 10% p.a. compounded quarterly. How much should Evelyn be prepared to pay for this investment?

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Expert Solution

Amount to be paid for the investment with first cash flow immediately=Quarterly cash flows/(return/4)*(1-1/(1+return/4)^(4*n))*(1+return/4)=1000/(10%/4)*(1-1/(1+10%/4)^(4*3))*(1+10%/4)=10514.209

jeff jeffy answered 2 years ago
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