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U are negotiating to make a 7-year loan of $25,000 to breck inc. to repay you, breck will pay $2,500 at the end of year 1, $5,000 at the end of year 2, and $7,500 at the end of year 3, plus a fixed but currently unspecified cash flow, x, at the end of each year from year 4 through year 7. breck is essentially riskless, so you are confident the payments will be made. you regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. what cash flow must the investment provide at the end of each of the final 4 years, that is, what is x?

User Spdaley
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25000=2500/1.08+5000/(1.08^2)+7500/(1.08^3)+x/(1.08^4)+x/(1.08^5)+x/(1.08^6)+x/(1.08^7), then we can solve for x. In this question, x=4733.
User Kirth
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