You observe that a fund pays $100 at the end of every year forever. (Include time...

 

Transcribed Image Text:

You observe that a fund pays $100 at the end of every year forever. (Include time lines with your answer.) a. If interest rates are 5 percent per year, how much would you be willing to pay for this series of cash flows? (3 marks) b. If interest rates are 5 percent per year, the first cash flow is still $100 and the cash flows are allowed to grow at 3 percent per year, how much would you be willing to pay for this series of cash flows? (3 marks) c. If interest rates are 5 per year and the cash flows are allowed to grow at 3 percent per year; but, the first cash flow of $100 does not occur until year 6, how much would you be willing to pay for this series of cash flows? (4 marks) You observe that a fund pays $100 at the end of every year forever. (Include time lines with your answer.) a. If interest rates are 5 percent per year, how much would you be willing to pay for this series of cash flows? (3 marks) b. If interest rates are 5 percent per year, the first cash flow is still $100 and the cash flows are allowed to grow at 3 percent per year, how much would you be willing to pay for this series of cash flows? (3 marks) c. If interest rates are 5 per year and the cash flows are allowed to grow at 3 percent per year; but, the first cash flow of $100 does not occur until year 6, how much would you be willing to pay for this series of cash flows? (4 marks)