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An investment will pay you $47,000 in 11 years. if the appropriate discount rate is 7.4 percent compounded daily, what is the present value?

User Jim True
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1 Answer

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Final answer:

The present value of the investment is $22,031.09.

Step-by-step explanation:

To calculate the present value of the investment, we can use the formula: PV = FV / (1 + r/n)^(n*t)

where PV is the present value, FV is the future value, r is the interest rate, n is the number of compounding periods per year, and t is the number of years. Using a calculator, we can solve for PV to find that the present value of the investment is approximately $22,031.09.

To find the present value for a discount rate of 7.4% compounded daily, we need to know how many times per year interest is compounded. Since there are 365 days in most years, interest would be compounded 365 times a year. So, n equals 365, and t is 11. Plugging these values into our formula, we can calculate the present value.

In this case, we get: PV = $47,000 / (1 + 0.074/365)365*11

Performing the calculation will provide the present value of the $47,000 to be received in 11 years, given the specified discount rate compounded daily.

User Sebastian Zarnekow
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