Question

Buying a "vacation timeshare" means buying the right to use a vacation property for a fixed period each year. Suppose that you pay $600 for a vacation timeshare and receive a "money-back guarantee" that at any time the company will buy back your timeshare, or if not, give you a $1200 bond. The deception, however, is that the bond is not redeemable for 45 years. Find the real value of the "guarantee"—that is, find the present value of $1200 in 45 years (assume a 4% interest rate compounded annually). (Round your answer to the nearest cent.)

Answer 1

the calculate to have present * Now, with $1200 in 45 years value of 4'l interest rate compounded anually wk T, F.us P.v[it 1]nt where, Fu= future value = $1200 Py = pre sent value = = ? 8 interest Date: 0.04. = number of to Compound = 1 t = number of years = 45 P. v 04)* periods [it 0.04 ise, 1200 - piva 205 4 380942 to nealest On rounding to cent, $ 205.44 Present value

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