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An investment will pay you $88,000 in six years. Assume the appropriate discount rate is 8 percent compounded daily. What is the present value?

User SJousse
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To find the present value of an investment that will pay $88,000 in six years with a discount rate of 8 percent compounded daily, you can use the formula for present value of a future cash flow:

PV = FV / (1 + r)^n

Where:

PV is the present value

FV is the future value or cash flow

r is the discount rate

n is the number of compounding periods

Let's calculate the present value step by step:

1. Convert the discount rate to a daily rate: Divide the annual discount rate of 8% by 365 (assuming 365 days in a year).

Daily rate = 8% / 365 = 0.0002192

2. Determine the number of compounding periods: Multiply the number of years by 365 to account for daily compounding.

Number of compounding periods = 6 years * 365 = 2190

3. Calculate the present value using the formula:

PV = $88,000 / (1 + 0.0002192)^2190 ≈ $64,748.63

The present value of the investment, rounded to the nearest cent, is approximately $64,748.63.

Therefore, based on the given discount rate and time period, the present value of the investment that will pay $88,000 in six years is approximately $64,748.63

User Kroltan
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