question archive Justine is thinking about purchasing an investment from RCBC Capital
Justine is thinking about purchasing an investment from RCBC Capital
Subject:FinancePrice:3.87 Bought7
Justine is thinking about purchasing an investment from RCBC Capital. If she buys the investment, Justine will receive P1,000 every three months for two years. The first P1,000 payment will be made as soon as she purchases the investment. If Justine's required rate of return is 16%, how much should she be willing to pay for this investment?
a. P1,368.57
b. P10,764.80
c. P7,002.05
d. P1,345.60
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Answer : c. P7,002.05
Step-by-step explanation
| Period | Period Factor | Cash Inflow | Present Value of Cash Inflows |
| (Cash Inflow / (1 +16%/4)Period Factor | |||
| 1st year - 1st Quarter | 0.00 | 1,000.00 | 1,000.00 |
| 1st year - 2nd Quarter | 1.00 | 1,000.00 | 961.54 |
| 1st year - 3rd Quarter | 2.00 | 1,000.00 | 924.56 |
| 1st year - 4th Quarter | 3.00 | 1,000.00 | 889.00 |
| 2nd year - 1st Quarter | 4.00 | 1,000.00 | 854.80 |
| 2nd year - 2nd Quarter | 5.00 | 1,000.00 | 821.93 |
| 2nd year - 3rd Quarter | 6.00 | 1,000.00 | 790.31 |
| 2nd year - 4th Quarter | 7.00 | 1,000.00 | 759.92 |
| Total | 7,002.05 |
