Question

you just won a prize and will recieve 5000 today plus 5000 a year from now. what is this prize woth to you today

Answer 1

$9587.16

Explanation:

We are given that

Today recieve prize=$5000

Recieve in a year from now=$5000

Total prize value=$5000+$5000=$10000

Consider

Rate of interest earn annually on investment ,r=9%=0

Then , we have to find the value of prize worth today.

Present value=
`Today\;prize\;value+Yearly\;prize\;value{1+r/100}`

Using the formula

Present value=
`5000+5000{1+9/100}=5000+4587.16`

Present value=$9587.16