Suppose the Cash Flows for a Financial Asset's Payment for Years

question 1

Multiple Choice

Suppose the cash flows for a financial asset's payment for years 1 through 4 are $100. That is, CFt = $100 for t (t = 1, ... ,4) . Further assume the the discount rate is 8.00% and at the end of four years that the financial asset will pay $1,000 in addition to the $100. Finally, assume a broker's commission of $30 is imposed by brokers to buy or sell the bond. To the nearest dollar, what is the correct price for this financial asset?

• A) $1,014
• B) $1,000
• C) $994
• D) None of these

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