A financial instrument just paid the investor $100 last year. If the cash flow is expected to last forever and increase each year at 3%, and with a discount rate of 8%, what should be the price that you are willing to pay for this instrument

Price willing to pay = $2,060

Explanation:

Given:

Cash flow paid = $100

Growth rate (g) = 3% = 0.03

Discount rate (d) = 8% = 0.08

Find:

Price willing to pay

Computation:

Price willing to pay = [(100)(1+0.03)] / [0.08-0.03]

Price willing to pay = 103 / 0.05

Price willing to pay = $2,060

you had 23.00$ because 28 - 5 = 23 then put it in dollar form

answer; /// blank(1); increases; blank(2); decreases;