If the Interest Rate Is 5% and Will Remain 5

question 10

Multiple Choice

If the interest rate is 5% and will remain 5% forever, how much would a rational investor be willing to pay for an asset that will pay him 6,300 dollars 1 year from now, 1,102 dollars 2 years from now, and nothing at any other time?

• A)7,000 dollars
• B)6,000 dollars
• C)140,000 dollars
• D)42,000 dollars
• E)8,000 dollars