The table above shows the interest rates available from investing in risk-free U.S. Treasury securities with different investment terms. What is the present value (PV) of cash flows from an investment that yields $6000 at the end of each year for the next four years?
A) $18,111
B) $27,167
C) $31,695
D) $22,639

Question

The table above shows the interest rates available from investing in risk-free U.S. Treasury securities with different investment terms. What is the present value (PV) of cash flows from an investment that yields $6000 at the end of each year for the next four years?
A) $18,111 
B) $27,167 
C) $31,695 
D) $22,639

Quizplus · Accepted Answer

D) PV of $6000 at 1.8% for 1 year = $5893.91;
PV of $6000 at 2.25% for 2 years = $5710.89;
PV of $6000 at 2.30% for 3 years = $5604.34;
PV of $6000 at 2.66% for 4 years = $5401.90;
sum of these four PVs = $22,638.99.

The Table Above Shows the Interest Rates Available from Investing