How much would be willing to pay for series of cash flows

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You observe that a fund pays $100 at the end of every year forever. (Include time lines with your answer.)

Question 1a. If interest rates are 5 percent per year, how much would you be willing to pay for this series of cash flows?

Question 1b. If interest rates are 5 percent per year, the first cash flow is still $100 and the cash flows are allowed to grow at 3 percent per year, how much would you be willing to pay for this series of cash flows?

Question 1c. If interest rates are 5 per year and the cash flows are allowed to grow at 3 percent per year; but, the first cash flow of $100 does not occur until year 6, how much would you be willing to pay for this series of cash flows?

Reference no: EM132465363

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