Question

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?

Answer 1

Answer:

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