41.7k views
5 votes
An investment will pay $202,000 at the end of next year for an investment of $182,000 at the start of the year. If the market interest rate is 7.9% over the same period, should this investment be made

User Farnoy
by
8.4k points

1 Answer

2 votes

Answer:

The first investment is more profitable than the general market interest rate.

Step-by-step explanation:

Giving the following information:

An investment will pay $202,000 at the end of next year for an investment of $182,000 at the start of the year. The market interest rate is 7.9% over the same period.

To compare both options, we need to calculate the final value of investing the $182,000 in other investment that pays a 7.9% interest rate.

We need to use the following formula:

FV= PV*(1+i)^n

FV= 182,000*(1.079)= $196,378

The first investment is more profitable than the general market interest rate.

User Manuel Beaudru
by
8.2k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories