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An investor pays 100,000 today for a 4-year investment that returns cash flows of 40,000 at...

An investor pays 100,000 today for a 4-year investment that returns cash flows of 40,000 at the end of each of years 2, 3 and 4. The cash flows can be reinvested at 4% per annum effective.

If the rate of interest at which the investment is to be valued is 5.0%, what is the net present value of this investment today?

Let P denote the NPV of the investment today:

(a) P < 0

(b) 0≤P <700

(c) 700≤P <1400

(d) 1400 ≤ P < 1600

(e) None of the above.

Math   Advanced-Math   
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