You sold a car 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 7.0%?

Question

You sold a car 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 7.0%?  ​

Quizplus · Accepted Answer

To find the effective price received for the car, we need to find the present value of the cash flow stream using the given interest rate of 7%. Using a financial calculator, we get the present value to be $5,840, which is the effective price received for the car.

You Sold a Car and Accepted a Note with the Following