An investment is expected to yield $300 in three years,$500 in five years,and $300 in seven years.What is the present value of this investment if our opportunity rate is 5%?
A) $735
B) $864
C) $885
D) $900

Question

Quizplus · Accepted Answer

The present value (PV) is calculated by discounting each cash flow back to the present using the formula PV = CF / (1 + r)^n, where CF is the cash flow, r is the rate, and n is the number of years. Calculating each: $300/(1.05)^3 + $500/(1.05)^5 + $300/(1.05)^7 = $864.

An Investment Is Expected to Yield $300 in Three Years,$500