Question

You sold your motorcycle and accepted a note with the following cash flow stream as your payment. It pays you nothing now, $520 next year, and $5,000 for the three years after that (Years 2-4). What was the effective price you received for the motorcycle assuming an nominal interest rate of 9.1%? Show your answer to the nearest $.01. Do not use the $ or , signs in your answer.

Answer 1

Year	Cash flow	[email protected] %	Present value
0	$               -	1.000	-
1	$            520	0.917	476.63
2	$        5,000	0.840	4200.69
3	$        5,000	0.770	3850.31
4	$        5,000	0.706	3529.16
Effective price			12056.78