Question

Assuming that you can earn an annual return of 8.25% on your next most attractive investment, how much is the security worth to you today?

a) $31,205
b) $18,912
c) $19,858

Answer 1

Answer: b) $18,912

Step-by-step explanation:

Divide the value of the investment in 9 years by the return you could be earning;

= 38,600 / (1 + 8.25%)⁹

= 18,911.9434

= $18,912