Author Question: You are offered an investment that will pay you the cash flows shown in the table. The first cash ... (Read 50 times)

jon_i · **on:** Apr 25, 2021

Question 1

You are offered a perpetuity that will pay you $18,000 per year starting in one year. The seller wants you to pay $300,000 for the perpetuity. If you buy it at that price, what return will you earn?
◦ 6%
◦ 5%
◦ 7%
◦ 8%
◦ 9%

Question 2

You are offered an investment that will pay you the cash flows shown in the table. The first cash flow occurs in one year. The cost of the investment is $1,086.59 (today). What is the return on the investment?

Year	Cash Flow
1	$70
2	$70
3	$70
4	$70
5	$1,070

◦ 5%
◦ 7%
◦ 9%
◦ 11%
◦ 13%

jjorrostieta · **Reply #1 on:** Apr 25, 2021

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