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
$11,253.70
$11,472.22
$10,925.92
$10,379.63
$11,289.48
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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