Question

If we receive $5,000, eight years from now, how much is that equivalent to today, if we believe that we can earn 5 percent on other opportunities?

Answer 1

The present value of $5,000 received 8 years from now, assuming a 5% interest rate, is approximately $3,729.57.

Step-by-step explanation:

To calculate the present value of $5,000 received 8 years from now, we can use the formula for present value of future cash flows with compound interest:

Present Value = Future Value / (1 + interest rate)^number of years

In this case, the interest rate is 5% or 0.05, and the number of years is 8:

Present Value = $5,000 / (1 + 0.05)^8 = $3,729.57

Therefore, the equivalent value of $5,000 received 8 years from now is approximately $3,729.57 today.