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You are thinking about investing $ 5,014 in your​ friend's landscaping business. Even though you know...

You are thinking about investing $ 5,014 in your​ friend's landscaping business. Even though you know the investment is risky and you​ can't be​ sure, you expect your investment to be worth $ 5,681 next year. You notice that the rate for​ one-year Treasury bills is 1 %. However, you feel that other investments of equal risk to your​ friend's landscape business offer an expected return of 10 %for the year. What should you​ do?

The present value of the return is $ _____.

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Answer #1

Present value of $5,681 FVx(11+r)An) Here, 4 A rate per annum 10.00% Number of years C Number of compoundings per per annum 1 1 AtCl rate per period ( r) BxCNumber of periods (n) 8 10.00% 9 10) 1 Preferred stock price in 7 years (FV) 5,681.00 Present value of $5,681 $ 5,164.55 5681x(14 1+10%) 1)

Hence, Present value of return is $5,164.55

Hence, He should invest in friend business.

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