A security will pay $300 in one year and $700 in two years. Ifthe appropriate...

A security will pay $300 in one year and $700 in two years. If the appropriate discount rate is 9.1% per year, what is the value of the security today?

Question 11 options:

	1)$863.07
	2)$856.98
	3)$852.41
	4)$873.48
	5)$841.16

Solutions

Expert Solution

Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

Press the CF button.
CF0= -$0.
Cash flow for all the years should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow, press the NPV button and enter the discount rate of 9.1%.
Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 9.1% the discount rate is $863.07.

Hence, the answer is option 1.

jeff jeffy answered 2 years ago

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