An investment will pay $150 at the end of each of the next 3 years, $100 at the end of Year 4, $400 at the end of Year 5, and $450 at the end of Year 6. If other investments of equal risk earn 9 percent annually, What is its present value?

Present Value = $978.83

Explanation:

Giving the following information:

An investment will pay $150 at the end of each of the next 3 years, $100 at the end of Year 4, $400 at the end of Year 5, and $450 at the end of Year 6.

i = 0.09

We need to use the following formula:

PV = FV / (1+i) ^n

For example:

Year 1 = 150 / 1.09 = 137.61

Year 4 = 100/1.09^4 = 70.84

Year 6 = 450/1.09^6 = 268.32

PV = 978.83