Question
2. You are facing two investment opportunities. The first one will return you with an uneven stream of cash flows. The second one is annuity
2. You are facing two investment opportunities. The first one will return you with an uneven stream of cash flows. The second one is annuity payments. Assume a 4.9% discount rate (your opportunity cost for money) and payments are in the end-of-period.
(2a) How much you are willing to pay for this uneven stream of cash flows? Round to the nearest whole dollar. Year Cash Flow 1 $3,300 2 $3,300 3 $4,500 4 $5,300
(2b) If the investment will provide you with $4200 end-of-period payments for the next four years. How much you are willing to pay for the annuity? (10 points)
(2c) If there is another annuity payments that will break-even with the uneven stream of cash flows (in part 2a), how much you should receive each year from the annuity investment? (10 points) Hint: if two investments break-even, they should have the same present value.
Do with financial calculator
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