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

question 33

Multiple Choice

Suppose the cash flows for a financial asset's payment for years 1 through 5 are $80. That is, CFt = $80 for t (t = 1, ... ,5) . Further assume the the discount rate is 8.00% and at the end of the five years that the financial asset will pay back $1,000 in addition to the $80. Finally, assume a broker's commission of $30 is imposed by brokers to buy or sell the financial asset and that a government entity imposes a transfer tax of $20 on each transaction. To the nearest dollar, what is the correct price for this financial asset?

• A) $912
• B) $914
• C) $916
• D) $918

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