10. A security generates a fixed yet unknown cash flow of some amount for each of...

 

Transcribed Image Text:

10. A security generates a fixed yet unknown cash flow of some amount for each of the first three years (i.e. t-1, t-2, and t-3), and then $1,000 per year for each of the remaining seven years (t-4 through t=10). The present value of the cash flows at an interest rate of 8% is $10,504.80. What annual cash flow does the security pay for years 1, 2, and 3? 10. A security generates a fixed yet unknown cash flow of some amount for each of the first three years (i.e. t-1, t-2, and t-3), and then $1,000 per year for each of the remaining seven years (t-4 through t=10). The present value of the cash flows at an interest rate of 8% is $10,504.80. What annual cash flow does the security pay for years 1, 2, and 3?

Answer rating: 100% (QA)

Lets denote the annual cash flow for years 1 2 and 3 as CF13 and the annual cash flow for years 4 th... View the full answer