An investment will pay you $22,000 in 7 years. The appropriate discount rate is 10 percent...

Question

Question

An investment will pay you $22,000 in 7 years. The appropriate discount rate is 10 percent compounded daily.

Required:

What is the present value?

rev: 09_17_2012

Multiple Choice

business finance

Answer 1

Answer #1

We use the formula:
A=P(1+r/365)^365n
where
A=future value
P=present value
r=rate of interest
n=time period.

22000=P*(1+0.1/365)^(365*7)

P=22000/(1+0.1/365)^(365*7)

=22000*0.496632915

=$10925.92(Approx).

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Answer 2

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