contestada

Suppose an investor has the opportunity to make an investment that promises to pay her $100,000 five years from now. How much should this investor be willing to pay today for this investment opportunity if she could otherwise invest her money in an interest-bearing account that yields 5% (annual) and compounds interest on a monthly basis?

Respuesta :

Answer:

The amount to be invested is $78,352.62

Explanation:

PV=FV/(1+r)^n

PV is present value and unknown

FV  is the future value of $100000

rate of return , r is 5%

n is the number of years given as 5

PV=100000/(1+0.05)^5

PV=$78352.62

The investor would have invest today $78352.62 in order to have in 5 years the sum of $100000 at compound interest of 5% per year.

The pv can also be computed using excel with formula pv(rate,nper,,-fv) as it is found in the attached spreadsheet.

It is better to know the two methods so that one can confirm answer from one method with the other method

Ver imagen abdulmajeedabiodunac

Otras preguntas