Question

You are thinking about investing$4,567in 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$5,712 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 of8%for the year.The present value of the return is？ What should you​ do?

Answer 1

Future value = present value*(1+ rate)^time

5712 = Present value*(1+0.01)^1

Present value = 5655.45

Using Calculator: press buttons "2ND"+"FV" then assign

FV =-5712

I/Y =1

N =1

PMT = 0

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(0.01,1,,5712,)

Future value = present value*(1+ rate)^time

5712 = 4567*(1+Interest rate/100)^1

Interest rate % = 25.07

Using Calculator: press buttons "2ND"+"FV" then assign

FV =-5712

PV =-4567

N =1

PMT = 0

CPT I/Y

Using Excel

=RATE(nper,pmt,pv,fv,type,guess)

=RATE(Interest rate/100,,-4567,5712,,)

Choose to invest in the landscaping business as it has highest Return%