Question

Jim sold a car and accepted a note promising cash flows of $1,000 at the end of Year 1, and 2,000 at the end of years 2, 3 and 4 as his payment. What was the effective price he received for the car, assuming an interest rate of 8.50%?

Your answer should be between 4,715.00 and 6,525.00. Round to 2 decimal places.

Answer 1

Year	Cash flow	× factor@ 8.50%	Present value
0	$                      -	1.0000	$                            -
1	$          1,000.00	0.9217	$                   921.66
2	$          2,000.00	0.8495	$                1,698.91
3	$          2,000.00	0.7829	$                1,565.82
4	$          2,000.00	0.7216	$                1,443.15
			$                            -
			$                            -
			$                            -
Price		3.2756	$                5,629.53

Answer is $5,629.53

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