Suppose the cash flows for a financial asset's payment for years 1 through 5 are $90. That is, CFt = $90 for t (t = 1, ... ,5) . Further assume the the discount rate is 7.00% and at the end of the five years that the financial asset will pay back $1,000 in addition to the $90. Finally, assume a broker's commission of $40 is imposed by brokers to buy or sell the financial asset and that a government entity imposes a transfer tax of $25 on each transaction. To the nearest dollar, what is the correct price for this financial asset?
A) $962
B) $971
C) $986
D) $1,002
Correct Answer:
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