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An investment pays $400 in one year, X amount of dollars in two years, and $500 in three years. The total present value of all the cash flows (including X) is equal to $1,500. If i is 6 percent, what is X?

Respuesta :

TomShelby

Answer:

X = 789.70

Explanation:

we solve for X considerign each deposit is discounted at the given rate using the lump sum formula:

[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]

[tex]\frac{400}{1.06}+\frac{X}{1.06^2} +\frac{500}{1.06^3} = 1,500\\X= (1,500 - \frac{400}{1.06} - \frac{500}{1.06^3}) \times 1.06^2[/tex]

X = 789.7018868

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