Offered structured note that pays a variety of cash flows

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Reference no: EM131052445

You have been offered a structured note that pays a variety of cash flows over the next 20 years and beyond. For the first three years $100,000 will be paid at the beginning of each year. The next two years no cash flows will be paid. The next cash flow is year six when a cash flow of $500,000 will be paid.

Starting at year 7 which will have cash flows that starts with $100,000 and then will rise by 5% each year for next eight years. No other cash flows will be come until the 20th year when $660,000 will be paid. If you required rate of return is 7.5% what would the price be of this cash flow stream?

Reference no: EM131052445

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