You sold your motorcycle and accepted a note with the following cash flow stream as your payment.What was the effective price you received for the car assuming an interest rate of 6.0%?
A) $5,987
B) $6,286
C) $6,600
D) $6,930
E) $7,277

Question

You sold your motorcycle and accepted a note with the following cash flow stream as your payment.What was the effective price you received for the car assuming an interest rate of 6.0%? 
A) $5,987 
B) $6,286 
C) $6,600 
D) $6,930 
E) $7,277

Quizplus · Accepted Answer

I/YR = 6.0%
 $\begin{array}{lccccc} 
& \mathrm{U} & 1 & 2 & 3 & 4 \
CFs& \$ 0 & \$ 1,000 & \$ 2,000 & \$ 2,000 & \$ 2,000 \
\text { PV of CFs: } & \$ 0 & \$ 943 & \$ 1,780 & \$ 1.679 & \$ 1.584
\end{array}$
 $\mathrm{PV}=\$ 5,987 \quad \text { Found using the Excel NPV function }$
$\mathrm{PV}=\$ 5,987 \quad \text { Found by summing individual PVs. }$
$\mathrm{PV}=\$ 5,987 \quad \text { Found using the calculator NPV key }$

You Sold Your Motorcycle and Accepted a Note with the Following