My friend lost a bet with me and now owes me money. However, he is broke...

My friend lost a bet with me and now owes me money. However, he is broke and will pay me in increments. $500 in two years, $400 in 4 years, and finally, $1000 in ten years, with an interest rate 3.2%. How much money did he bet today (present value)?

If you could, please show the formula and how you got the answer. The answer we are given is $1,551.92 and I'm confused on how to get there. Thanks!

Expert Solution

Present value = (CF2 / (1+r)^2) + (CF4 / (1+r)^4) + (CF10 / (1 + r)^10)

= ($500 / (1+3.2%)^2) + ($400 / (1+3.2%)^4) + ($1000 / (1+3.2%)^10)

= $469.4730 + $352.6478 + $$729.7986

= $1,551.92

Present value = $1,551.92

jeff jeffy answered 2 years ago

Chevalier de Méré won money when he bet unsuspecting patrons that in 4 rolls of 1 die, he could get at least one 6; but he lost money when he bet that in 24 rolls of 2 dice, he ..

Chevalier de Méré won money when he bet unsuspecting patrons that in 4 rolls of 1 die, he could get at least one 6; but he lost money when he bet that in 24 rolls of 2 dice, he could get at least a double 6. Using the probability rules, find the probability of each event and explain why he won the majority of the time on the first game but lost the majority of the time when playing the...

Pardon me for my stubborn classical/semiclassical brain. But I bet I am not the only one...

Pardon me for my stubborn classical/semiclassical brain. But I bet I am not the only one finding such description confusing. If EM force is caused by the exchange of photons, does that mean only when there are photons exchanged shall there be a force? To my knowledge, once charged particles are placed, the electromagnetic force is always there, uninterruptedly. According to such logic, there has to be a stream of infinite photons to build EM force, and there has to...

Henry bet his friend Rupert that he (Henry) could make himslef faint by hyperventilating and grunting....

Henry bet his friend Rupert that he (Henry) could make himslef faint by hyperventilating and grunting. Who will win the bet? Explain the physiological changes associated with hyperventilation and grunting. You will need to include cardiovascular changes in you answer? hint: grunting reduces venous return

My friend Joe works at a drug company, and he heard that in a week, the...

My friend Joe works at a drug company, and he heard that in a week, the drug company is going to approval for its newest blockbuster drug to cure cancer. Before the world knows about this, Joe tells me. I tell my brother Jim. Then Jim goes and buys lots of stock in this drug company. A week later, the world learns of the drug approval and the stock price increases by 200%. Jim is a millionaire from his trades....

A friend wants to borrow money from you. He states that he will pay you $3,300...

A friend wants to borrow money from you. He states that he will pay you $3,300 every 6 months for 8 years with the first payment exactly 6 years and 6 months from today. The interest rate is 5.6 percent compounded semiannually. What is the value of the payments today? A) $30,219.57 B) $31,226.89 C) $30,354.43 D) $29,396.47 E) $31,447.66

My friend drives a 2010 Nissan Altima with ≈ 105,500 miles. Assuming he could drive this...

My friend drives a 2010 Nissan Altima with ≈ 105,500 miles. Assuming he could drive this car for up to 5 more years and then sell, calculate the equivalent uniform annual cost of ownership over the next 5 years. Specific Instructions: 1. Estimate 6 costs of ownership over the next 5 years. He knows his car is aging, so at least two of your cash flows need to be gradient cash flows. Explain each of your estimates (e.g. if you...

Your brother-in-law, Representative Howard Hughes, lost his bid for reelection. However, thanks to your efforts, he...

Your brother-in-law, Representative Howard Hughes, lost his bid for reelection. However, thanks to your efforts, he established himself while in Congress as an astute analyst of the health field and as a consequence, has taken a position as partner at the prestigious Atlanta investment firm of Keller, Keller, Keller, Keller, and Disher. You have decided to take him up on his offer to join him as a manager in the healthcare division. The other partners have little insight into healthcare...

General Assignment: My friend drives a 2010 Nissan Altima with ? 105,500 miles. Assuming he could...

General Assignment: My friend drives a 2010 Nissan Altima with ? 105,500 miles. Assuming he could drive this car for up to 5 more years and then sell, calculate the equivalent uniform annual cost of ownership over the next 5 years. Specific Instructions: Estimate 6 costs of ownership over the next 5 years. He knows his car is aging, so at least two of your cash flows need to be gradient cash flows. Explain each of your estimates (e.g. if...

C programming My friend Steve wants to buy something nice for himself. He doesn't know want...

*C programming* My friend Steve wants to buy something nice for himself. He doesn't know want he wants yet but he is thinking of spending $1,000 on it or more. He makes $500 a month and has a monthly living expense of $325. He also has a lot of bi-monthly subscription payments which costs him $450 every other month ($450 is the bimonthly expenses) . He wants to know when he will be able to buy want he wants and...

Jack’s friend plans to buy a boat 45 years from now, when he retires. Today’s price...

Jack’s friend plans to buy a boat 45 years from now, when he retires. Today’s price for the boat is $300,000. The price is expected to rise 3% per year. The friend also wants to send his child to BC in 12 years. College is expected to cost $117,000 in the child’s first year, growing at 4% per year while in school. College lasts for 4 years and the first payment is due the first day of school. The friend...

Question