Valuation of cash flow streams Question 1[5 marks] Suppose that you...
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Accounting
Valuation of cash flow streams
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Suppose that you are considering an investment product that promises to pay $ at the end of each year for the next five years. Assume that a discount rate of is applicable to similar investment alternatives. Answer questions a and b below.
a How much would you be willing to pay for the investment product? Lecture notes pp
Answer show the stepscalculation toward your results:
b Consider another investment product that promises to pay $ every six months for the next five years, with the first payment to be made in six months from today. Applying the same discount rate, how much would you pay for this product? See p for a monthly case.
Answer show the stepscalculation toward your results:
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