If the interest rate is 5% and will remain 5% forever, how much would a rational investor be willing to pay for an asset that will pay him 6,300 dollars 1 year from now, 1,102 dollars 2 years from now, and nothing at any other time?

A) 7,000 dollars
B) 6,000 dollars
C) 140,000 dollars
D) 42,000 dollars
E) 8,000 dollars

Rational Investor

An individual who makes decisions by maximizing expected utility, based on consistent preferences and available information.

Interest Rate

The cost of borrowing money, typically expressed as a percentage of the total amount loaned.

Asset

A resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefits.