Question

An investment product promises to pay $42,000 at the end of 10 years. If an investor feels this investment should produce a rate of return of 12%, compounded annually, what's the most the investor should be willing to pay for the investment?a) $42,000b) $15,146c) $13,523d) $130,446

Answer 1

$15,146

Step-by-step explanation:

$42,000 x .32197* = $13,523 (rounded)

*PV of $1: n = 10; i = 12%

Answer 2

Investor willing to pay for investment $13523

Step-by-step explanation:

Using the formula

PV = FV x (1 / (1+r) ^ n

PV = $42000 x ( 1 / (1+0.12)^10

PV = 42000 x 0.322

PV = $13523