Question

Brett has an investment opportunity that promises to pay him $ 26000 in four years. He could earn an 8​% annual return investing his money elsewhere. What is the maximum amount he would be willing to invest in this​ opportunity?

Answer 1

The maximum amount Brett would be willing to invest in this opportunity is $19,424.09.

Step-by-step explanation:

To determine the maximum amount Brett would be willing to invest in this opportunity, we need to calculate the present value of the $26,000 payment he would receive in four years. Using the formula for present value, we can calculate:

PV = FV / (1 + r)^n

where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods. Plugging in the values, we get:

PV = 26000 / (1 + 0.08)^4 = $19,424.09

Therefore, Brett would be willing to invest a maximum amount of $19,424.09 in this opportunity.