Getting the stream of investment payments

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Jake will be offered the following stream of investment payments over the next four years: $600 at the end of 1st year, $100 at the end of 2nd year, $400 at the end of the 3rd year, and $100 at the end of 4th year.  Alternatively, he can have a lump sum of $1000 immediately. He expects to earn 6% annual interest compounded semi-annually on his investments.

1. Which offer does he prefer (think carefully of what interest rate to use)?

2. What is the minimum amount he would accept now instead of getting the stream of investment payments?

Reference no: EM131382916

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