Question

Now, Let's assume that the couple would delay taking that vacation until summer 2024, where the cost would increase to $10,000, and let's also assume that their friend Kim has just made an offer to deliver $10,000 to the couple upon their arrival at Geneva Airport on the first of June, 2024. Kim's offer is a proposal of an alternative payment of a personal loan of $7,500 that she got from the couple in 2017. The agreement then was that the loan had to be paid back by Summer of 2024 with a compound interest rate of 5% annually. What would be the current value of the $10,000 assuming the compound interest rate stays at 5%?

Answer 1

PV = Cash flow/ (1+r)^n , n= time = 2022-2015 = 7 years

PV = $10000 / ( 1+0.05)^7 = 7106.813 = $ 7107

Step-by-step explanation: