Problem:
You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 4.07 percent, compounded annually: How much is this invests worth today:
End of year: 1. $954 2. $1,345 3. $2,425 4. $2,303
Task:
What is the present value of this investment if 4.07 percent per year is the appropriate discount rate? Explain in detail and provide all workings.