Question

You are the financial manager for a recreation center that has signed an option to purchase new elliptical machines for $22,000 in two years. If you have an investment opportunity that guarantees 7% interest, how much must you invest to have the necessary funds to purchase the elliptical machines

Answer 1

$19,215.65

Step-by-step explanation:

To the determine the amount to be invested, we have to find the present value of $22,000 at 7%

P= FV ( 1 + r) ^-n

FV = Future value = $22,000

P = Present value

R = interest rate = 7%

N = number of years = 2

$22,000(1.07)^-2 = $19,215.65

I hope my answer helps you