Question

ou can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.) a. If the interest rate is 11%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)

Answer 1

PV= $1,657,386.6

Step-by-step explanation:

Giving the following information:

Future Value (FV)= $3,100,000

Interest rate (i)= 11%

Number of periods (n)= 6 years

To calculate the present value of the selling price, we need to use the following formula:

PV= FV/(1+i)^n

PV= 3,100,000 / (1.11^6)

PV= $1,657,386.6