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