Suppose that a risk-free investment will make three future payments of $250 in one year, $250 in two years, and $250 in three years

Missing part of the question: If the risk-free interest rate is 8%, what is the current value of the investment?

Solution:

PV = FV / (1+r) ^n, PV = Present value, FV = Future value, r = interest rate, n = number of years

Therefore,

PV = 250 / (1+0.08) ^1 + 250 / (1+0.08) ^2 + 250 / (1+0.08) ^3 = $644.27