2. You are considering an investment which pays you $300,000.00 eight years from now (nothing in...

2. You are considering an investment which pays you $300,000.00 eight years from now (nothing in between). Currently, similar risk investments are earning 8.5% compounded twice per year. What should you pay for the investment now? Show algebraic work, and confirm using the spreadsheet finance function.

Solutions

Expert Solution

PV= FV/(1+r)^n

Where,

FV= Future Value

PV = Present Value

r = Interest rate =8.50%/2 =4.25%

n= periods in number =8*2 =16

= $300000/( 1+0.0425)^16

=300000/1.94633

= $154136.05

jeff jeffy answered 2 years ago

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