Assume that Ratchet and Clank are trying to borrow money from you to finance their new business. Assume that Ratchet and Clank promise to repay you in four installments, one payment of $5,000 to be made exactly 2 years from today, a second payment of $10,000 to be made exactly 5 years from today, a third payment of $15,000 to be made exactly 9 years from today, and a final payment of $21,000 to be made exactly 13 years from today. If your opportunity cost of funds is 7.5% p.a., (that is, use an interest rate of 7.5% for this question), how much should you be willing to lend Ratchet and Clank today?

Answer rating: 100% (QA)

To calculate the present value of the cash flows promised by Ratchet and Clank we will use the conce... View the full answer