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3 August, 02:13

Suppose that a risk-free investment will make three future payments of $100 in one year, $100 in two years, and $100 in three years. If the Federal Reserve has set the risk-free interest rate at 8 percent, what is the proper current price of this investment?

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  1. 3 August, 02:42
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    The answer is $ 257.70

    Explanation:

    PV = Σ of discounted payments

    PV = 100 (1.08^-1) + 100 (1.08^-2) + 100 (1.08^-2) = $ 257.70
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